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

Question

Elliott Bass

Business

27 January, 07:48

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

+2

Answers (1)

Know the Answer?

Fisher Woodward · Answer 1

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.