Question

Resource Company acquired a tract of land containing an extractable natural resource. Cooper is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 4,000,000 tons, and that the land will have a value of $500,000 after restoration. Relevant cost information follows:
Land: $6,400,000
Estimated restoration costs: 1,200,000.

If Galt maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?

a. $1.60
b. $1.75
c. $2.00
d. $1.90

Answer 1

I think it is B. I’m sorry if I’m wrong.