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Monica [59]
3 years ago
12

Galt Company acquired a tract of land containing an extractable natural resource. Galt is required by the purchase contract to r

estore 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 $600,000 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
Business
1 answer:
Alenkasestr [34]3 years ago
4 0

Answer:

the depletion expense per ton is $1.75

Explanation:

<em>Cost for the contract</em>

6,400,000 for the land

<u>1,200,000</u> obligation to restore the land

7,600,000

<em>Salvage value</em>

600,000

<em>Amount subject to depreciation</em>

7,600,000 - 600,000 = 7,000,000

<em>tons of minerals</em>

4,000,000

rate per ton:

depreciable amount / tons

7,000,000/4,000,000 = $1.75

the depletion expense per ton is $1.75

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