Question

On july 4, 2021, swifty mining company purchased the mineral rights to a granite deposit for $1510000. it is estimated that the recoverable granite will be 400000 tons. during 2021, 97000 tons of granite was extracted and 68000 tons were sold. the amount of the depletion expense recognized for 2021 would be ?

a. $256700.
b. $416700.
c. $136700.
d. $216700.

Answer 1

The depletion expense recognized for 2021 can be calculated using the formula: Depletion Expense = (Cost of Mineral Rights / Estimated Recoverable Units) * Units Extracted. In this case, the amount of the depletion expense recognized for 2021 is $487,325. None of the given options are correct.

Step-by-step explanation:

The depletion expense recognized for 2021 can be calculated using the formula:

Depletion Expense = (Cost of Mineral Rights / Estimated Recoverable Units) * Units Extracted

In this case, the cost of mineral rights is $1,510,000 and the estimated recoverable units are 400,000 tons. The units extracted in 2021 are 97,000 tons. Plugging these values into the formula, we get:

Depletion Expense = ($1,510,000 / 400,000) * 97,000

Depletion Expense = $5.0275 per ton * 97,000 tons = $487,325

Therefore, the amount of the depletion expense recognized for 2021 is $487,325, which is not one of the given options.