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Depletion

Two types of depletion: Cost & Percentage. Cost depletion : Multiply factor by amt of resource removed. Where: factor, P t = First cost / Resource capacity. Depletion. Depletion applies to non-renewable assets (like natural resources).

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Depletion

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  1. Two types of depletion:Cost & Percentage Cost depletion: Multiply factor by amt of resource removed Where: factor, Pt = First cost / Resource capacity Depletion Depletion applies to non-renewable assets(like natural resources) Percentage depletion: Multiply income by % from Table

  2. Example: A silver mine purchased for $2.5 million is expected to yield one million ounces of silver. Determinethe depletion charge in a yr when 300,000 ounces are mined and sold for $5.00 per ounce by (a)Cost depletion, and (b) Percentage depletion Depletion Example Solution: (a) Pt = 2,500,000 / 1,000,000 = $2.50 per ounce Cost depletion = 2.50(300,000) = $750,000 (b) Percentage depl = 300,000(5.00)(0.15)= $225,000

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