When calculating depletion, what is the proper treatment of residual value?
A)There is no residual value in the calculation of depletion expense.
B)The residual value is subtracted from cost to determine the depletable base.
C)The residual value is added to cost to determine the depletable base.
D)Residual value is ignored until the end of the asset's life at which time it is used to limit the final year's expense amount.

Question

Quizplus · Accepted Answer

Residual value is not considered in the calculation of depletion expense, as depletion is concerned with the allocation of the cost of natural resources over their useful life, and residual value is typically not applicable.

When Calculating Depletion, What Is the Proper Treatment of Residual