Question

Alaska Mining Co. acquired mineral rights for $67,500,000. The mineral deposit is estimated at 30,000,000 tons. During the current year, 4,000,000 tons were mined and sold. a. Determine the amount of depletion expense for the current year. Round the depletion rate to two decimal places.

Answer 1

$9,000,000

Step-by-step explanation:

The computation of the depletion expense for the current year is shown below:

Depletion rate per unit is

= Acquired mineral rights ÷ Estimated mineral deposit

= $67,500,000 ÷ 30,000,000 tons

= $2.25 per ton

If the 4,000,000 tons were mined and sold, so the depletion expense is

= $2.25 × 4,000,000 tons

= $9,000,000