Brief Exercise 7-38 (Algorithmic)

Natural Resources and Depletion

Luper Company acquired a tract of land which contained iron deposits for $5,118,200. Luper spent $269,000 to access the iron ore. Luper estimates that 2,000,000 tons of ore will be extracted. The estimated value of the land after the ore is extracted is $207,200. During the current year, Luper extracts 150,000 tons of iron ore.

Required:

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

Cost of the natural resource.

Amount of depletion