Question

A company purchased a tract of land for its natural resources at a cost of $1,890,400. It expects to mine 2,140,000 tons of ore from this land. The salvage value of the land is expected to be $264,000. The depletion expense per ton of ore is:

Answer 1

Answer:

$0.76 per ton or ore

Explanation:

to calculate the depletion expense per ton of re, we must first calculate the land's initial cost - salvage value = $1,890,400 - $264,000 = $1,626,400

now we divide by total expected ore reserves = 2,140,000 tons

depletion expense per ton of ore = $1,626,400 / 2,140,000 tons = $0.76 per ton

that means that the land will depreciate depending on the number of tons of ore extracted, not the time passed