Depletion

Depletion uses activity rather than elapsed time. If a supported $1,800,000 depletable base relates to 900,000 recoverable units, the rate is $2 per unit. Extracting 120,000 units assigns $240,000 of depletion to current production. If 95,000 of those units are sold and 25,000 remain, $190,000 reaches expense and $50,000 remains in inventory.

Three checks prevent plausible-looking errors:

extracted units = sold units + ending extracted units
extraction depletion = depletion expense + depletion in ending inventory
ending resource carrying amount = opening depletable amount − cumulative extraction depletion

The schedule verifies allocation from supplied inputs; it does not establish reserve quantity, ownership rights, environmental obligations, commodity prices, or economic viability. Those claims require other evidence.

Retirement cost follows separate authority. ASC 410-20-25-5 places the initially recognized retirement cost in the related long-lived asset. Paragraph 35-2 requires systematic and rational allocation of that cost. These paragraphs do not prescribe a general natural-resource depletion model. ASC 360-10-35-4 describes depreciation as cost allocation rather than valuation. That idea helps distinguish allocation from a new resource valuation, but the paragraph does not prescribe depletion. The exercise stipulates the depletable base, recoverable units, and method.

The Linden Peak example builds the full resource base. The independent Northstar depletion practice checks the extraction, inventory, and expense bridge.