Under U.S. GAAP, what should be included in the calculation of depletion? Estimated future exploration costs O Estimated units that can be extracted O The number of units sold during the period O Interest costs to unwind the discount on restation costs

Under U.S. GAAP, what should be included in the calculation of depletion? Estimated future exploration costs O Estimated units that can be extracted O The number of units sold during the period O Interest costs to unwind the discount on restation costs

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Under U.S. GAAP, what should be included in the calculation of depletion?
Estimated future exploration costs
O Estimated units that can be extracted
O The number of units sold during the period
O Interest costs to unwind the discount on restation costs

Expert Solution

Step 1

DEPLETION

Depletion method is specially suited to mines, oil wells, quarries, sandpits and similar assets of a wasting character.

In Depletion method, the cost of the asset is divided by the total workable deposits of the mine etc. & by following the above manner rate of depreciation can be ascertained.

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