Question

Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period. Santa Fe paid $429,000 for extraction rights. A geologist estimates that Santa Fe will recover 6,500 pounds of turquoise. During the current year, Santa Fe extracted 1,950 pounds of turquoise, which it sold for $277,000. What is Santa Fe's cost depletion expense for the current year?
A. $85,800
B. $128,700
C. $156,440
D. $429,000
E. None of these

Answer 1

Answer:

cost depletion expense =  $128700

so correct option is B. $128,700

Explanation:

given data

paid = $429,000

recover = 6,500 pounds

extracted = 1,950 pounds

sold = $277,000

to find out

cost depletion expense

solution

we get here cost depletion expense that is express as

cost depletion expense = $\frac{paid}{recover}$ × extracted   ...........1

put here value we get

cost depletion expense = $\frac{429000}{6500}$ × 1950

cost depletion expense =  $66 × 1950

cost depletion expense =  $128700

so correct option is B. $128,700