Cardoza Corp. purchased a mine, which holds an estimated 38,000 tons of iron ore, on January 1, 2017, for $538,000. The mine is expected to have zero residual value. The business extracted and sold 15,500 tons of ore in 2017 and 8,800 tons of ore in 2018. What is the depletion expense for 2017? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

A) $219,480

B) 318,600

C) 124,608

D) $86,608

A) $219,480

Explanation:

The most depreciation method is the unit-of-activity depreciation method. In this technique, the useful life of an asset is expressed in terms of its expected productivity. Depreciation is per unit and is derived by dividing the cost of the asset by its expected productivity.

In this case: Expected productivity 38,000

Cost of the machine: $538,000.00

units produced in 2017: 15,500

Depreciation per unit: = $538,000/38,000

=$14.157

Rounding off = $14.16 per unit

Depreciation for 2017 = 15,500x $ 14.16

= $ 219,480