In 2019 a Mining Company Paid $180,000 for Mining Rights

question 34

Short Answer

In 2019 a mining company paid $180,000 for mining rights. It is estimated that a total of 225,000 tons of ore are available to be extracted. During 2019, 21,000 tons of ore were mined. What is the amount of Depletion Expense recorded in the adjusting entry for 2019?

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Definitions:

Shortage Cost

The costs incurred when demand for a product exceeds the supply, including potential lost sales, customer dissatisfaction, and additional operational costs to manage the shortage.

Investment In Inventory

The resources allocated by a business to purchase goods and materials held in stock for the purpose of resale or production.

Flexible Policy

A strategy allowing for adaptable operational or financial decisions based on changing circumstances, often to mitigate risks or seize opportunities.

Minimal Cash Balances

Minimal Cash Balances represent the smallest amount of cash that a business needs to keep on hand to meet its immediate payment obligations and avoid liquidity issues.