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In January 2017, Expo Mining Company paid $4,400,000 to buy a new mine. Expo estimates it will be able to remove 4,000,000 tons of ore from the mine. It also estimates that the property will be worth $300,000 after the ore has been extracted. Expo incurred a total of $900,000 in development costs when preparing the mine for production. In the mine’s first year of operation (2017), Expo removed 500,000 tons of ore and was able to sell 475,000 tons. Given this information, Expo should record total 2017 depletion cost of A : $593,750 B : $662,500 C : $625,000 D : $629,375

Respuesta :

Answer:

correct option is C : $625,000

Explanation:

given data

paid = $4,400,000

total explore  = 4,000,000 tons

salvage = $300,000

incurred a total =  $900,000

explore  = 500,000 tons

sell = 475,000 tons

solution

we get here cost incurred for asset use is capitalized is

so depletion expose is

depletion expose = [tex]\frac{cost-salvage}{total\ tons\ explored}[/tex] × explored .................1

put here value we get

depletion expose = [tex]\frac{4400000+900000-300000}{4000000}[/tex] ×  500000

depletion expose = $625000

so correct option is C : $625,000