Depletion Expense Calculator

Natural Resource Depletion Expense Tool

Input Fields

Total cost of resource

C

$

Initial cost of acquiring and developing the natural resource

Salvage value

S

$

Estimated residual value at the end of resource life

Total estimated units

U

Estimated total units of resource available

Units extracted

E

Number of units actually extracted during the period

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Depletion Expense

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Depletion Expense Formula

$$\text{Depletion Expense} = \left( \frac{\text{Cost} – \text{Salvage Value}}{\text{Total Estimated Units}} \right) \times \text{Units Extracted}$$

Explanation:
The formula allocates the cost of a natural resource over its useful life based on the quantity extracted. This method is similar to depreciation but applies specifically to depletable resources.

Depletion accounting is used primarily by industries such as mining, oil & gas, and forestry. It ensures that the cost of using up a natural resource is accurately reflected in financial records. The depletion expense is typically calculated annually and affects both profitability and tax deductions.

Example Variables:

• Cost of resource site: $500,000
• Salvage value: $50,000
• Estimated total units: 100,000 tons
• Units extracted: 10,000 tons
• Depletion Expense = ((500,000 – 50,000) / 100,000) × 10,000 = $45,000

Use Cases:

• Oil & gas extraction companies
• Logging and timber operations
• Mining and resource development projects