B is corrent. The requirement is to determine the depletion rate. Cantor should capitalize all costs to prepare the mine for extraction. Cantor would then calculate the depletion rate as the cost minus residual value divided by the estimated units of output. Therefore, the depletion amount per ton would be ($2,000,000 + $500,000 – $100,000)/$750,000 tons = $3.20 per ton. Therefore, this answer is correct.
A is incorrect. Cantor should capitalize all costs to prepare the mine for extraction. Cantor would then calculate the depletion rate as the cost minus residual value divided by the estimated units of output. Therefore, the depletion amount per ton would be ($2,000,000 + $500,000 – $100,000)/$750,000 tons = $3.20 per ton.
C is incorrect. Cantor should capitalize all costs to prepare the mine for extraction. Cantor would then calculate the depletion rate as the cost minus residual value divided by the estimated units of output. Therefore, the depletion amount per ton would be ($2,000,000 + $500,000 – $100,000)/$750,000 tons = $3.20 per ton.
D is incorrect. Cantor should capitalize all costs to prepare the mine for extraction. Cantor would then calculate the depletion rate as the cost minus residual value divided by the estimated units of output. Therefore, the depletion amount per ton would be ($2,000,000 + $500,000 – $100,000)/$750,000 tons = $3.20 per ton.
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