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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Cost depletion of natural resources is most like which of these depreciation methods?

  1. (a) straight-line
  2. (b) units-of-production
  3. (c) declining-balance
  4. (d) sum-of-the-years’-digits

To determine

Find the correct option, the option that indicates the depreciation method that is similar to the computation of depletion expense.

Explanation

Depletion: Depletion is a process of allocation of the cost of natural resources like oil reserves, mineral deposits, and timber tracts, based on the capacity or output extracted or harvested.

Justification for correct answer: Units-of-production method of depreciation is similar to the method used to determine depletion expense because the expense in both the methods, is computed based on the units or output produced or consumed in the period. Hence, option (b) is correct...

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