Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period. Santa Fe paid $300,000 for extraction rights. A geologist estimates that Santa Fe will recover 5,000 pounds of turquoise. During the current year, Santa Fe extracted 1,500 pounds of turquoise, which it sold for $200,000. What is Santa Fe's cost depletion expense for the current year?

a. $85,800b. $128,700c. $156,440d. $429,000e. None of these

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Business

Aileen Ball

5 October, 18:21

Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period. Santa Fe paid $300,000 for extraction rights. A geologist estimates that Santa Fe will recover 5,000 pounds of turquoise. During the current year, Santa Fe extracted 1,500 pounds of turquoise, which it sold for $200,000. What is Santa Fe's cost depletion expense for the current year?

a. $85,800b. $128,700c. $156,440d. $429,000e. None of these

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Answers (1)

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Brown Sugar · Answer 1

The answer is: E) None of these

Explanation:

First we must calculate the depletion expense per pound of turquoise:

$300,000 / 5,000 estimated pounds of turquoise = $60 per pound of turquoise

If Santa Fe extracted 1,500 pounds of turquoise this year, their total depletion expense for the year should be:

1,500 pounds of turquoise x $60 per pound of turquoise = $90,000