Question Completion:
A company acquires a natural resource for $1,400,000 and spends another $530,000 on development of the site and $320,000 for a non-movable tangible asset installed at the site and $150,000 for tangible movable equipment. Both assets have an expected useful life of 10 years. The natural resource is expected to yield 140,000 units over its expected life. In year 1, 45,000 units are extracted from the resource. What is the depletion expense for year 1?
Answer:
The depletion expense for Year 1 is:
= $77,143.50.
Explanation:
a) Data and Calculations:
Acquisition cost of the natural resource = $1,400,000
Site development cost = 530,000
Cost of non-movable equipment = 320,000
Cost of movable equipment = 150,000
Total cost of natural resource = $2,400,000
Expected useful life of assets = 10 years
Expected units yield from the natural resource = 140,000
Resource extracted in Year 1 = 45,000
Depletion rate = $2,400,000/140,000 = $1.7143
Depletion expense for Year 1 = $1.7143 * 45,000 = $77,143.50
