Bonita corporation acquires a coal mine at a cost of $480,000. intangible development costs total $120,000. after extraction has occurred, bonita must restore the property (estimated fair value of the obligation is $96,000), after which it can be sold for $192,000. bonita estimates that 4,800 tons of coal can be extracted.

Question

Matthew Soto

Business

26 September, 14:03

Bonita corporation acquires a coal mine at a cost of $480,000. intangible development costs total $120,000. after extraction has occurred, bonita must restore the property (estimated fair value of the obligation is $96,000), after which it can be sold for $192,000. bonita estimates that 4,800 tons of coal can be extracted.

+1

Answers (1)

Know the Answer?

Hanna · Answer 1

With the given data, I can only solve for the depletion cost per unit.

Depletion cost per unit = (Total cost - Salvage Value) / Total Estimated Units available

Total Cost includes the following:

Acquisition: 480,000

intangible development cost: 120,000

restoration cost: 96,000

Salvage value is the amount it can be sold: 192,000

Total estimated units available is the 4,800 tons of coal.

Depletion cost per unit = (480,000 + 120,000 + 96,000 - 192,000) / 4,800

Depletion cost per unit = 504,000 / 4,800

Depletion cost per unit = 105 per ton

In the event that there is a given figure of units extracted, simply multiply the depletion cost per unit by the number of units extracted to get the depletion cost on the extraction.