Question

In January, 2020, Yager Corporation purchased a mineral mine for $5,100,000 with removable ore estimated by geological surveys at 2,000,000 tons. The property has an estimated value of $300,000 after the ore has been extracted. The company incurred $1,500,000 of development costs preparing the mine for production. During 2020, 600,000 tons were removed and 480,000 tons were sold. What is the amount of depletion that Yager should expense for 2020?

Answer 1

Answer:

$1,512,000

Explanation:

The computation of the depletion expense is shown below:

= (Purchase value of mineral mine - the estimated value of the property + development costs) ÷ estimated tons × number of tons sold

= ($5,100,000 - $300,000 + $1,500,000) ÷ 2,000,000 tons × 480,000 tons

= $1,512,000

Simply we deduct the estimated value of the property and added the development cost to the purchase value of mineral mine and then do the proportionate so that the accurate value can come