Question Help A company purchased mineral assets holding approximately 240,000 tons of ore for $960,000. The estimated residual value of the assets is zero. During the first year, 40,000 tons are extracted and sold. What is the amount of depletion for the first year?

The amount of depletion for the first year did by the company in purchasing the mineral assets were as below :

And will do Cost less the residual value and divide by capacity :

= 960000 - 0 / 240000

= $4 per ton.

In the first year the company acquired 40,000 extract .

= 40,000 x 4

= $160,000 amount of depletion happens in the first year .

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$160,000

Explanation:

First calculate the Depletion rate per ton which is;

= ( Cost - residual value) / Capacity in tons

= (960,000 - 0) / 240,000

= $4 per ton

In first year, 40,000 tons were used. Amount of depletion is therefore;

= 40,000 * 4

= $160,000

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