On March 31, 2021, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $164,000, and the quarry was expected to yield salable rock of 20,000 tons. In 2021, Belotti extracted and sold 4,000 tons of rock from the quarry. Belotti would record depletion in 2021 of:
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On March 31, 2021, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $164,000, and the quarry was expected to yield salable rock of 20,000 tons. In 2021, Belotti extracted and sold 4,000 tons of rock from the quarry. Belotti would record depletion in 2021 of:
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