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4 November, 10:03

A coal mine was acquired for $2,000,000. No salvage value was expected, and the company expects to mine 2,000,000 tons of coal. During the first year, it mines and sells 220,000 tons of coal. The depletion expense is

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  1. 4 November, 10:19
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    The depletion expense of the coal mine can b calculated using the following formula:

    Depletion expense for the year = (Cost of mine - Salvage value) * (Tons of coal sold in the year / Total Tons Capacity of the mine)

    Given information:

    Cost of mine = $2,000,000

    Salvage value = 0

    Tons of coal sold in the year = 220,000 tons

    Total Tons Capacity of the mine = 2,000,000 tons

    So, Depletion expense for the year = (2,000,000-0) * (220,000/2,000,000) = $220,000

    Hence, the Depletion expense for the first year is $220,000
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