Question

A company purchased land for its natural resources at a cost of 1,610,000. It expects to mine 2,275,000 tons of ore from this land. The residual value of the land is estimated to be 415,000. What is the amount of depletion per ton of ore?

Answer 1

The amount of depletion per ton of ore is calculated by subtracting the residual value from the cost of the land and then dividing by the amount of ore, resulting in a cost of $0.53 per ton.

Step-by-step explanation:

The student's question relates to the concept of depletion, which is an accounting concept used in the context of natural resources. The depletion cost per ton of ore can be calculated by taking the total cost minus the residual value of the land, and then dividing by the total amount of ore that can be extracted. So, in this problem, the depletion cost per ton of ore will be:

Depletion per ton = (Total cost - Residual value) / Amount of ore extractable

Depletion per ton = (1,610,000 - 415,000) / 2,275,000 tons

Depletion per ton = 1,195,000 / 2,275,000 tons

Depletion per ton = $0.53 per ton.

Thus, the amount of depletion per ton that the company should record as an expense for each ton of ore mined is $0.53.