Frederick Mining Company owns a large parcel of land which costs $850,000

Accounting Oct 07, 2020

Frederick Mining Company owns a large parcel of land which costs $850,000. It is estimated to contain 1,500,000 tons of recoverable ore. It is estimated that the recovery of the ore will take 10 years and that after the ore is fully depleted the land will be sold for a market value of $100,000. In 2018, Frederick extracted and sold 105,000 tons of ore. What is the amount of depletion that should be recorded? Round total the nearest whole dollar.

Expert Solution

Computation of Amount of Depletion Expense :

Depletion Expense = (Original Cost-Salvage value)/Total Tons Extracted*Tons Extracted in the Year

= ($850,000-$100,000)/1,500,000*105,000

Depletion Expense = $52,500

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