Chapter 11, Problem 11.8BE

To determine

Depletion:

It refers to the process of proportionately distributing the cost of the extracting natural resources such as coal, mines, and petroleum from the earth to the number of units extracted. Use the following formula to determine the cost of annual depletion:

$\text{Depletion Cost per Unit }=\frac{\left(\text{Cost of the asset }-\text{ Residual value}\right)}{\text{Estimated Number of Units}}$

$\text{Depletion Expense}=\left(\begin{array}{l}\text{Depletion Cost per Unit }\times \\ \text{ Number of units Extracted and Sold}\end{array}\right)$

To determine: The amount of depletion for year 1 and year 2.