Question: In January 2014 Vorst Company purchased a mineral mine for

In January 2014, Vorst Company purchased a mineral mine for $2,640,000. Removable ore was estimated at 1,200,000 tons. After it has extracted all the ore, Vorst will be required by law to restore the land to its original condition. The expected present value of this obligation is $180,000. Vorst believes it will be able to sell the property after restoration for $300,000.
During 2014, Vorst incurred $360,000 of development costs to prepare the mine for production, and it removed and sold 60,000 tons of ore.

In its 2014 income statement, what amount should Vorst report as depletion expense?

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  • CreatedSeptember 10, 2014
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