Underestimating the number of tons of a mineral that can be mined over a mineral deposit's life will result in
A) overstated total assets each year.
B) overstated net income each year.
C) overstated depletion expense each year.
D) no effect on total assets each year.

Question

Quizplus · Accepted Answer

Underestimating the number of tons of a mineral that can be mined over a mineral deposit's life will result in an understatement of depletion expense each year, since depletion is calculated based on the total amount of minerals extracted from the deposit. This will also ultimately result in an overstatement of total assets since the mineral deposit is being depleted at a slower rate than assumed, and an understatement of cost of goods sold (and therefore an overstatement of net income) since the cost of the extracted minerals will be spread out over a longer period of time.

Underestimating the Number of Tons of a Mineral That Can