Question

26)A coal mine cost $1,003,000 and is estimated to hold 54,000 tons of coal. There is no residual value. During the first year of operations, 11,000 tons are extracted and sold. Calculate depletion expense for the first year. (Round any intermediate calculations to the nearest cent.)

Answer 1

Step-by-step explanation:

To calculate the depletion expense for the first year, we first need to calculate the depletion rate per ton of coal. To do this, we need to divide the cost of the coal mine by the estimated number of tons of coal it contains: $1,003,000 / 54,000 tons = $18.60/ton

Next, we need to multiply the depletion rate per ton by the number of tons of coal that were extracted and sold during the first year: $18.60/ton * 11,000 tons = $204,600

This is the depletion expense for the first year. It represents the portion of the cost of the coal mine that was allocated to the coal that was extracted and sold during the year.