If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons,

total depletion on the mine is based on the 1,200,000 tons.

depletion expense is recognized on the 1,500,000 tons extracted.

depletion expense is recognized on the 1,200,000 tons extracted and sold.

a separate accumulated depletion account is set up to record depletion on the 300,000 tons extracted but not sold

Question

Business

Kolby Dennis

19 April, 07:31

If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons,

total depletion on the mine is based on the 1,200,000 tons.

depletion expense is recognized on the 1,500,000 tons extracted.

depletion expense is recognized on the 1,200,000 tons extracted and sold.

a separate accumulated depletion account is set up to record depletion on the 300,000 tons extracted but not sold

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Answers (1)

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Eliezer Webb · Answer 1

depletion expense is recognized on the 1,200,000 tons extracted and sold.

Explanation:

Since the mine extracted 1,500,000 tons but was only able to sell 1,200,000. The 300,000 tons that were not sold should not be used to recognize depletion expense for the current period. Those tons remain "in stock" and can be sold on a later date, on which they should be used to recognized depletion expense.

Therefore, depletion expense is recognized on the 1,200,000 tons extracted and sold.