Porter Resources Company Acquired a Tract of Land Containing an Extractable

question 91

Multiple Choice

Porter Resources Company acquired a tract of land containing an extractable natural resource. Porter is required by its 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 2,000,000 tons, and that the land will have a value of $1,000,000 after restoration. Relevant cost information follows: If Porter maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?

• A) $3.25
• B) $3.75
• C) $4.00
• D) $4.50

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Definitions:

Circular Flow Model

An economic model illustrating the flow of goods, services, and money between households and businesses in an economy.

Federal Government

The national government of a federal country that shares power with regional governments like states or provinces.

Proprietary Income

Income generated from owned properties or businesses, exclusive to the owner or proprietor.

Excise Tax

A tax charged on specific goods or commodities produced or sold within a country and often included in the price of the product.