Question

Depletion expense a. is usually reported as cost of goods sold when the resource is sold. b. excludes restoration costs from the depletion base. c. excludes intangible development costs from the depletion base. d. includes tangible equipment costs in the depletion base.

Answer 1

The correct answer is a. is usually reported as cost of goods sold when the resource is sold.

Step-by-step explanation:

In the case of depletion, something similar to depreciation happens, but it has nothing to do with the assets, but with the natural resources that are being used for work purposes, because as all good even these resources that emanate from the land tend to run out of time and use.

For example, if you are the owner of a cement company you should know for your accounting that just as the machinery (for example, cranes, trucks, etc.) is subject to the reduction of its value, the mines from where you extract the limestone, although not they lose their value in terms of land, the resources that are in the land will be reduced as they are extracted, so the value of the mine must be reduced in the accounting books of your company.