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7 October, 21:44

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

+1
Answers (1)
  1. 8 October, 00:33
    0
    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.
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