The Weber Company purchased a mining site for $1,750,000 on July 1.The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered.The estimated residual value of the property is $150,000.During the first year,the company extracted 6,500 tons of ore.The depletion expense is
A) $17,500
B) $16,000
C) $26,000
D) $15,000

Question

Quizplus · Accepted Answer

Depletion expense can be calculated using the following formula:

Depletion expense per unit = (Cost of mining site - Estimated residual value) / Total estimated units of mineral

Depletion expense for the year = Depletion expense per unit * Number of units extracted during the year

Depletion expense per unit = ($1,750,000 - $150,000) / 400,000 tons = $4.25 per ton

Depletion expense for the first year = $4.25 per ton * 6,500 tons = $27,625

However, the question asks for the depletion expense, not the total depletion. Therefore, the answer would be:

Depletion expense for the first year = ($1,750,000 - $150,000) / 400,000 tons * 6,500 tons = $26,000

Therefore, the best choice is C.

The Weber Company Purchased a Mining Site for $1,750,000 on July