Question

A company purchased a tract of land for its natural resources at a cost of $1,920,500. it expects to mine 2,150,000 tons of ore from this land. the salvage value of the land is expected to be $265,000. the depletion expense per ton of ore is:

Answer 1

Depletion expense (E) is equal to the Fixed Cost minus the Salvage Value divided by the tons of ore to be mined. The equation would then be: E = ($1,920,500 – $265,000) / 2,150,000. Therefore, E is equal to $0.77/ton of ore.