Question

Cameron Corp. purchased a mine on January​ 1, 2018, for​$530,000, which is estimated to contain​ 35,000 tons of iron ore. There is no residual value. The business extracted and sold​ 7,500 tons of ore in 2018 and​ 10,800 tons of ore in 2019. What is the depletion expense for​ 2019? (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​dollar.)

A.

​$277,062

B.

​$252,838

C.

​$113,550

D.

​$163,512

Answer 1

D.$163,512

Step-by-step explanation:

Depletion expense is a charge against profits for the use of natural resources.

Depletion rate = cost to purchase resource/ number of units = $530,000/ 35,000 tons = $15.14 per ton

Depletion expense for 2019 = Depletion rate * number of units extracted and sold in 2019 = $15.14 * 10,800 = $163,512