Question

On April 17, 2024, the Loadstone Mining Company purchased the rights to a copper mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the copper totaled $5,400,000. The company expects to extract 1,080,000 tons of copper during a four-year period. During 2024, 258,000 tons were extracted and sold immediately. Required: Calculate depletion for 2024. Is depletion considered part of the product cost and included in the cost of inventory

Answer 1

The depletion for 2021 is $1,028,000 .

No, depletion is not considered part of the product cost and isn't included in the cost of inventory

Depletion per ton

1. Depletion per ton = $4280000/1070000

                = $4 per ton

Depletion for 2021 = 257000 tons*$4

               = $1,028,000

Therefore, The depletion for 2021 is $1,028,000 .

2. Depletion is not considered as part of the product cost, It is shown as an expense on the income statement and reduced from the value of the natural resource and so it is equivalent to the depreciation of assets.

Therefore, No, depletion is not considered part of the product cost and isn't included in the cost of inventory

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