Question

A coal mine in Alaska cost $1,000,000 and is estimated to hold 10,000 tons of coal. There is no residual value. 2,000 tons are extracted and sold during the first year of operations. Calculate depletion expense for the first year.

		$100,000
		$150,000
		$200,000
		$20,000

Answer 1

Correct answer----$200,000

A	Cost	$   10,00,000.00
B	Residual Value	$                        -
C=A - B	Depletion base	$   10,00,000.00
D	Usage in units(in Tons)	10000
E	Depletion per Ton	$               100.00

Book Value	Usage	Depletion expense (2000 x $100)
$   10,00,000.00	2000	$ 2,00,000.00