Question

Weber Company purchased a mining site for $531,197 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 91,060 tons will be recovered. The estimated residual value of the property is $46,043. During the first year, the company extracted 4,187 tons of ore. The depletion expense is

Answer 1

$22,317

Step-by-step explanation:

Depletion unit method is used for mines, quarries and oil wells.

Depletion Expense = Depletion rate × Number of units taken in the period

Where,

Depletion rate = (Cost of Asset - Residual Value) ÷ Expected Total Contents in Units

= ($531,197 - $46,043) ÷ 91,060 tons

= $5.33 per unit

Therefore,

Depletion Expense = $5.33 × 4,187 tons

= $22,317