Question

Shale Miner Co. acquired mineral rights for $60,000,000. It is estimated that there are 80,000 total tons of the resource, and during the current year 10,750 tons were mined and sold. What information is needed to calculate the rate of depletion?

Answer 1

To calculate depletion, the information needed are:

1. The cost of the machine

2. Current tons mined

3. Estimated total tons of the resource

$8,062,500

Step-by-step explanation:

Depletion cost = tons extracted in the year x (cost of asset/ total estimated tons)

10,750 × ($60,000,000 / 80,000) = $8,062,500

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