Question

During 2014, Corporation acquired a mineral mine for $4,000,000 of which $400,000 was ascribed to land value after the mineral has been removed. Geological surveys have indicated that 10 million units of the mineral could be extracted. During 2014, 1,800,000 units were extracted. What is the amount of depletion for 2014?

Answer 1

The amount of depletion for 2014 can be calculated using the formula: Depletion per unit = (Total cost - Land value) / Total units. Given the total cost and land value, we can calculate the depletion per unit and then multiply it by the units extracted in 2014 to find the amount of depletion for that year.

Step-by-step explanation:

The amount of depletion for 2014 can be calculated using the formula:

Depletion per unit = (Total cost - Land value) / Total units

Depletion for 2014 = Depletion per unit x Units extracted in 2014

Given that the total cost is $4,000,000 and the land value is $400,000, the depletion per unit can be calculated as follows:

Depletion per unit = ($4,000,000 - $400,000) / 10,000,000 = $0.36 per unit

Therefore, the amount of depletion for 2014 can be calculated as:

Depletion for 2014 = $0.36 x 1,800,000 = $648,000