Question

depletion at the beginning of year 1, ithaca incorporated purchased land for $1,500,000 from which it expects to extract 800,000 tons of minerals. the estimated residual value is $250,000. what is ithaca's unit depletion rate? round your answer to two decimal places. $fill in the blank 1 per ton assume ithaca extracted 25,000 tons in year 1. what is ithaca's total depletion for year 1? round to nearest dollar. $fill in the blank 2

Answer 1

Ithaca's unit depletion rate is $1.56 per ton. The total depletion for year 1 is $39,000.

Step-by-step explanation:

To find Ithaca's unit depletion rate, we need to subtract the estimated residual value from the purchase price and divide the result by the expected amount of minerals extracted.

The unit depletion rate is calculated as follows:

(Purchase Price - Residual Value) / Expected Amount of Minerals Extracted

Substituting the values, we get:

($1,500,000 - $250,000) / 800,000

Simplifying the calculation gives us the unit depletion rate of $1.56 per ton.

To find Ithaca's total depletion for year 1, we need to multiply the extraction (or consumption) rate by the number of tons extracted in year 1.

The total depletion for year 1 is calculated as follows:

Extraction Rate x Tons Extracted in Year 1

Substituting the values, we get:

$1.56 per ton x 25,000 tons

Calculating the result gives us a total depletion for year 1 of $39,000.