Cantor Co. purchased a coal mine for $2,000,000. It cost $500,000 to prepare the coal mine for the extraction of the coal. It was estimated that 750,000 tons of coal would be extracted from the mine during its useful life. Cantor planned to sell the property for $100,000 at the end of its useful life. During the current year, 15,000 tons of coal were extracted and sold. What would Cantor's depletion amount be per ton for the current yea

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Business

Kendall Randolph

11 July, 21:13

Cantor Co. purchased a coal mine for $2,000,000. It cost $500,000 to prepare the coal mine for the extraction of the coal. It was estimated that 750,000 tons of coal would be extracted from the mine during its useful life. Cantor planned to sell the property for $100,000 at the end of its useful life. During the current year, 15,000 tons of coal were extracted and sold. What would Cantor's depletion amount be per ton for the current yea

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Janae Skinner · Answer 1

Depletion cost for current year $ 48,000

Explanation:

Computation of depletion amount

Purchase cost $ 2,000,000

Preparation cost $ 500,000

Cost of mine $ 2,500,000

Sale value at end of period $ (100,000)

Depletion basis of mine $ 2,400,000

Total estimated extraction from mine 750,000 tons

Cost of extraction per ton ($ 2,400,000 / 750,000) $ 3.20 per tons

Extraction during year 15,000 tons

Depletion cost for the year $ 48,000