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On July 4, 2014, Wyoming Mining Company purchased the mineral rights to a granite deposit for $1,600,000. It is estimated that the recoverable granite will be 400,000 tons. During 2014, 100,000 tons of granite was extracted and 60,000 tons were sold. The amount of the Depletion Expense recognized for 2014 would be (Points : 1)
a. $200,000
b. $120,000
c. $240,000
d. $400,000

Respuesta :

Answer:

Option (C) is correct.

Explanation:

Given that,

Company purchased the mineral rights = $1,600,000

Estimate the recoverable granite = 400,000 tons

Granite extracted in 2014 = 100,000 tons

Granite sold during 2014 = 60,000 tons

Depletion expense per ton:

= Purchasing cost of mineral rights ÷ Estimated recoverable granite

= $1,600,000 ÷ 400,000 tons

= $4  per ton

Depletion expense to be recognized :

= Granite sold during 2014 × Depletion expense per ton

= 60,000 × 4

= 240,000

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