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LenaWriter [7]
3 years ago
6

Perez Company acquires an ore mine at a cost of $1,400,000. It incurs additional costs of $400,000 to access the mine, which is

estimated to hold 1,000,000 tons of ore. 180,000 tons of ore are mined and sold the first year. The estimated value of the land after the ore is removed is $200,000. Calculate the depletion expense from the information given.
Business
1 answer:
Amiraneli [1.4K]3 years ago
3 0

Answer:

total cost of mine  = $1,400,000 + $400,000 = $1,800,000

estimed number of tons of ore = 1,000,000

residual value of land at the end of the mine =  $200,000

depletion expenses  per ton of ore =  ($1,800,000 - $200,000)/1,000,000

                                                          =  $1,600,000/1,000,000

                                                          = $1.6/ton

total depletion expenses  for the first year =  Ddepletion expenses per ton x number of ton of ore produced

                                                                 =  $1.6 x 180,000  

                                                                 =   $288,000

Explanation:

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