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Nolan Company acquired a tract of land containing a natural resource. Nolan is required by the purchase contract to restore the land after extraction. Geological surveys show that the estimated amount to be extracted will be 5,000,000 tons, and that the land will have a value of $1,000,000 after restoration. Relevant costs:Land $7,000,000Estimated restorationcosts: 1,500,000What should be the charge to depletion expense per ton of extracted material?

Respuesta :

abiolataiwo2015

Answer:

1.50

Explanation:

Calculation to determine what should be the charge to depletion expense per ton of extracted material

Land cost $7,000,000

Add: Estimated restoration costs $1,500,000

Less: Value of Land after restoration (-$1,000,000)

Cost for Depletion $7,500,000

($7,000,000+$1,500,000-$1,000,000)

÷Divide by Total tons 5,000,000 tons

Depletion expense per ton 1.50

(7,500,000÷5,000,000 tons)

Therefore what should be the charge to depletion expense per ton of extracted material is 1.50

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