Coronado Industries acquired a tract of land containing an extractable natural resource. Coronado is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2560000 tons, and that the land will have a value of $1080000 after restoration. Relevant cost information follows: Land $7420000 Estimated restoration costs 1480000 If Coronado maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material

Depletion expenses per cost is $3.06

Explanation:

Geological surveys estimate that the recoverable reserves will be $2,560,000 tons, and that the land will have a value of $1,080,000 after restoration

The cost of the Land is $7,420,000 and the Estimated restoration costs is $1,480,000.

Therefore we will calculate the total cost.

Total Asset cost=$7,420,000 +$1,480,000

Total Asset cost=$8,900,000

The depletion expenses of Coronado Industries  is:

Depletion expenses per cost= (Asset cost - Residual value) / Number of unit of depletion

Depletion expenses per cost = ($8,900,000 - $1,080,000) / $2,560,000

Depletion expenses per cost = 7820000/2560000

Depletion expenses per cost  = 3.0546875

Depletion expenses per cost = $3.06

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