Question

A company purchased a tract of land for its natural resources at a cost of $1,544,800. it expects to mine 2,020,000 tons of ore from this land. the salvage value of the land is expected to be $252,000. the depletion expense per ton of ore is:

Answer 1

The gradual decrease in the value of natural resource is called depletion. The deplection expense is calculated on the cost net off salvage value.

$Depletion expense per ton of ore=\frac{(Cost of resource - salvage value)}{Expected Mine} =\frac{(1544800-252000)}{2,020,000} = 0.64$

Therefore, Depletion expense per ton of ore would be $0.64 per ton of ore.