Question

depletion at the beginning of year 1, ithaca incorporated purchased land for $1,500,000 from which it expects to extract 800,000 tons of minerals. the estimated residual value is $250,000. what is ithaca's unit depletion rate?

Answer 1

The unit depletion rate for Ithaca Incorporated is $1.56 per ton.

Step-by-step explanation:

The unit depletion rate can be calculated by subtracting the estimated residual value from the purchase cost of the land and then dividing it by the expected amount of minerals to be extracted.

In this case, the calculation would be:

Unit depletion rate = (Purchase cost - Residual value) / Expected tons of minerals extracted
= ($1,500,000 - $250,000) / 800,000 tons
= $1,250,000 / 800,000 tons
= $1.56 per ton

Therefore, Ithaca Incorporated's unit depletion rate is $1.56 per ton.