Question

A coal mine cost $1,004,000 and is estimated to hold 56,000 tons of coal. There is no residual value. During the first year of​ operations, 7,000 tons are extracted and sold. Calculate depletion expense for the first year.​

Answer 1

$125,500

Step-by-step explanation:

The initial cost of coal mine=$1,004,000

Estimated useful life=56,000 tons of coal

tons of coal extracted in the first year=7,000 tons

depletion expense=(cost of coal mine-residual value)*tons of coal extracted in the first year/estimated useful life

residual value =$0

depletion expense=($1,004,000-$0)*7000/56000

depletion expense=$1,004,000*7000/56000

depletion expense for first year=$125,500