Depletion of Natural Resources}

Luper Company acquired a tract of land that contained iron deposits for \(\$ 2,500,000\). Luper spent \(\$ 120,000\) to access the iron ore. Luper estimates that \(2,000,000\) tonnes of ore will be extracted. The estimated value of the land after the ore is extracted is \(\$ 100,000\). During the current year, Luper extracts 150,000 tonnes of iron ore.

Required:

Compute the cost of the natural resource and the amount of depletion taken during the year.

Exercise