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Balcom Corporation acquires a coal mine at a cost of $1,500,000. Intangible development costs total $360,000. After extraction has occurred, Balcom must restore the property (estimated fair value of the obligation is $180,000), after which it can be sold for $510,000. Balcom estimates that 5,000 tons of coal can be extracted. What is the amount of depletion per ton?

Question 17 options:

A.
$306

B.
$510

C.
$300

D.
$372

Respuesta :

Answer:

A. $306

Explanation:

The computation of amount of depletion per ton is shown below:-

Depletion per ton = (Acquisition cost + Intangible development cost + Fair value of the obligation - Salvage value) ÷ Tons of coal

= ($1,500,000 + $360,000 + $180,000 - $510,000) ÷ 5,000

= (2,040,000 - $510,000) ÷ 5,000

= $1,530,000 ÷ 5,000

= $306

Therefore for computing the depletion per ton we simply applied the above formula.