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