Question

?sands company purchased mining rights for $500,000. they expect to harvest 1 million tons of ore over the next five years. during the current year, sands mined 350,000 tons of ore. the entry to record the depletion would include

Answer 1

Given the cost and the expected harvest, therefore the depletion cost per ton of ore is:

Depletion cost per ton = $500,000 / 1,000,000 tons

Depletion cost per ton = $0.5 / ton

Since during that year, harvest is 350,000 tons of ore, therefore:

Depletion cost that year = ($0.5 / ton) (350,000 tons)

Depletion cost that year = $175,000

Therefore, the entry should be:

A debit to Depletion Expense for $175,000