Question

Of the following costs related to the development of natural resources, which one is not a part of depletion cost?

A) Intangible development costs such as drilling costs, tunnels, and shafts
B) Tangible equipment costs associated with machinery used to extract the natural resource
C) Exploration costs
D) Acquisition cost of the natural resource deposit

Answer 1

Exploration costs are not a part of depletion cost in the development of natural resources.

Step-by-step explanation:

The cost that is not a part of depletion cost is C) Exploration costs. Depletion cost refers to the cost incurred in the extraction of natural resources and reducing their reserves. It includes tangible equipment costs associated with machinery used to extract the natural resource, as well as the acquisition cost of the natural resource deposit. However, exploration costs, which are incurred in the search for new natural resource deposits, are not considered a part of depletion cost. Tangible equipment costs are considered a separate form of capital expenditure and are typically depreciated over the useful life of the equipment rather than depleted like natural resources.