Test: CPA Financial Accounting and Reporting (FAR)

1.

A mining company uses the depletion method to allocate the cost of removing natural resources from its mine. Which of the following statements is correct?

Neither of the above

Both of the above

The depletion base equals the cost to purchase the mine minus the mine's estimated residual value

If the number of units mined equaled the number of units sold, the depletion expense would be equal to the number of units mined

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