Question

Shale Miner Co. acquired mineral rights for $60,000,000. It is estimated that there are 80,000 tons of the resource, and during the current year 10,750 tons were mined and sold. What is the amount of depletion for the current year?

Answer 1

$8,062,500

Step-by-step explanation:

Data provided in the question:

Amount for which the Shale Miner Co. acquired mineral rights = $60,000,000

Estimated amount of resources to be recovered = 80,000 tons

Amount of resources mined during the year = 10,750 tons

Now,

Cost per ton of the resource mined

= ( Right acquiring amount ) ÷ ( Estimated amount of resources to be mined)

= $60,000,000 ÷ 80,000 tons

= $750 per ton

Therefore,

The amount of depletion for the current year

= Resources mined during the year × Cost per ton of the resource mined

= 10,750 tons × $750 per ton

= $8,062,500