Crowder Company acquired a tract of land containing an extractable natural resource. Crowder is required by the 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 5,000,000 tons and that the land will have a value of $1,000,000 after restoration. Relevant cost information follows:
Land $9,000,000
Estimated restoration costs 1,500,000
If Crowder maintains no inventories of extracted material, what should be the depletion expense per ton of extracted material?
a. $2.10
b. $1.90
c. $1.80
d. $1.60

B) $1.90

Explanation:

total reserves = 5,000,000 tons

value after restoration = $1,000,000

land cost:

land $9,000,000

restoration costs $1,500,000

total depreciable value = $9,000,000 + $1,500,000 - $1,000,000 = $9,500,000

using the units of depletion depreciation method, the depletion expense per ton = total depreciable value / total reserves = $9,500,000 / 5,000,000 tons = $1.90 per ton

this means that for every ton of extracted material, the company must record a $1.90 depletion expense.

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.