Daley Co. owns a mineral deposit with an estimated 600,000 tons of available ore. It was purchased for $300,000 and has no salvage value. During the current period, Daley mined and sold 40,000 tons of ore. Depletion expense for the period will be how much?

Depletion expense=$20,000

Explanation:

Depletion expense is a way of measuring the total value of the unit purchased in terms of cost per unit of its sale. It is usually used in businesses involving mining.

The formula for calculating the depletion expense is be given by;

Depletion expense=cost per unit*total number of units sold

where;

Cost per unit=Purchase cost/total units

Cost per unit=300,000/600,000=$0.5 per unit

Total units sold = 40,000 tons

Replacing;

Depletion expense=Cost per unit*total number of units sold

Depletion expense = (0.5*40,000) = $20,000

Depletion expense=$20,000