Percy Resources Company acquired a tract of land containing an extractable natur

Question

Percy Resources Company acquired a tract of land containing an extractable natural resource. Percy is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,200,000 after restoration. Relevant cost information follows:

Land
$9,000,000

Estimated restoration costs
1,800,000


If Percy maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?


$5.40


$3.90


$4.50


$4.80

Explanation / Answer

If Percy maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?


$5.40


$3.90


$4.50


$4.80

9,000,000 +1,800,000 ------1,200,000    /     2,000,000 tons    = $4.80

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.