Question

A coal mine cost $1,003,000 and is estimated to hold 50,000 tons of coal. There is no residual value. During the first year of operations, 6,000 tons are extracted and sold. Calculate depletion per unit. (Round your answer to the nearest cent.)

Answer 1

Answer:

The answer is $120, 360

Explanation:

Depletion is the allocation of cost to an accounting period as units of a natural resource are mined or consumed.

The formula for calculating depletion per unit is depletion per unit is:

the number of consumed units of the natural resources x the cost per unit.

Total cost is $1,003,000

Unit consumed per unit is

6,000 tons ÷  50,000 tons

0.12

Therefore, depletion per unit is

$1,003,000 x 0.12

=$120, 360