Perez company acquires an ore mine at a cost of 2100000. It incurs additional costs of 588000 to access the mine, which is estimated to hold 1500000 tons of ore 205000 tons of ore mined and sold the first year.

$367,360

Explanation:

Depletion is an estimated cost of a natural resource that is extracted. This resource is expensed as the extraction is made.

As per given data

Value of Rights = $2,100,000

Additional Cost = $588,000

Total Cost = $2,100,000 + $588,000 = $2,688,000

Estimated resources = 1,500,000 tons

Resources extracted in the period = 205,000 tons

Depletion expense is based on ratio of the amount of extraction in period to the total expected resource.

Depletion Expenses = Total Cost  x Resources Extracted in the period / Total resource

Depletion Expenses = Total Cost  x Resources Extracted in the period / Total resource

Depletion Expenses = $2,688,000 x 205,000 / 1,500,000 tons = $367,360

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