Question

Vaughn Manufacturing acquires a coal mine at a cost of $1920000. Intangible development costs total $354000. After extraction has occurred, Vaughn must restore the property (estimated fair value of the obligation is $183000), after which it can be sold for $208000. Vaughn estimates that 5000 tons of coal can be extracted. What is the amount of depletion per ton

Answer 1

$452

Step-by-step explanation:

The amount of depletion per ton is computed below.

= (Acquired cost of coal mine + Intangible development costs + Fair value of the obligation - Sale value) ÷ Number of estimated tons of coal extracted

= ($1,920,000 + $353,000 + $193,000 - $208,000) ÷ 5000

= $452

The amount of depletion per ton is therefore $452