Final answer:
The accumulation of depletion expense in a contra asset account at the end of each accounting period is false.
Step-by-step explanation:
The statement is False.
Depletion expense is not accumulated in a contra asset account at the end of each accounting period. Instead, depletion expense is expensed directly on the income statement as a cost of using up natural resources.
The statement that the amount of depletion expense is accumulated in a contra asset account at the end of each accounting period is true. In accounting for natural resources, depletion is the allocation of a natural resource's cost over its service life. Similar to depreciation of fixed assets, when an entity extracts natural resources, it must allocate a portion of the resource's cost to each accounting period. The depletion expense is recorded each period based on the amount of resource extracted and is accumulated in a contra asset account known as the Accumulated Depletion account. This account is subtracted from the natural resource asset account on the balance sheet, hence reducing the carrying amount of the asset.
For example, if a company is engaged in mining activities and depleting mineral resources, the cost of the minerals extracted would be recorded as depletion expense on the income statement, reducing the company's net income.