On March 31, 2016, M. Belotti purchased the right to remove gravel from an old r

Question

On March 31, 2016, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $255,000, with estimated salable rock of 30,000 tons. During 2016, Belotti loaded and sold 4,800 tons of rock and estimated that 25,200 tons remained at December 31, 2016. At January 1, 2017, Belotti estimated that 9,600 tons still remained. During 2017, Belotti loaded and sold 14,400 tons. Belotti would record depletion in 2016 of (Do not round depletion rate per ton):

A. $48,571

B. $40,800

C. $40,825

D. $30,600

Explanation / Answer

Solution.

Calculation of Deplation in the year.

Belotti would record depletion in 2016 of = $255,000 / 30,000 = $8.5 per tones

So,

4,800 x $8.5 = $40,800.

Depletion in year 2016 = $40,800.

Answer is B. $40,800

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