Extract, allocate, and reconcile natural-resource cost

At year-end, Linden Peak has extracted 120,000 units but sold only 95,000. If the controller sends all current depletion to expense, the unsold units carry none of the resource cost consumed to produce them.

Define the resource and its cost layers

The resource packet can contain acquisition rights, exploration, development, surface land, movable equipment, residual value, and an associated asset retirement cost. Do not total the folder. Identify the governing guidance and role of each amount.

The bounded example stipulates $1,200,000 mineral rights, $400,000 development, $325,804.56 initial asset retirement cost, and $100,000 residual value. Its depletable base is $1,825,804.56. This does not establish that the same cost categories apply to every mine, timber tract, quarry, or oil-and-gas property.

Treat recoverable units as an estimate

Reserve or recoverable-unit evidence can depend on geology, engineering, technology, legal access, extraction plans, economic conditions, and approval. The schedule uses 900,000 supplied units; it does not prove them. Preserve the estimate date, preparer, reviewer, source report, unit definition, and revisions.

depletion per unit = supported depletable base ÷ estimated recoverable units

The example rate is $2.028671737 per unit. Rounding it immediately to $2.03 would overstate current 120,000-unit extraction depletion by $159.39 and the full 900,000-unit base by $1,195.44. Keep full precision in the calculation and round the displayed dollar outputs.

Follow the physical and cost flow

First apply the rate to units extracted. Then assign current extraction between units sold and ending extracted-goods inventory:

120,000 extracted = 95,000 sold + 25,000 ending inventory
$243,440.61 extraction depletion
= $192,723.82 depletion expense + $50,716.79 in ending inventory

Beginning extracted-goods inventory, spoilage, processing costs, and multiple grades would add layers. This packet stipulates zero beginning inventory and homogeneous units so the extraction-versus-sale distinction stays visible.

Revise without erasing prior extraction

If supported remaining recoverable units change, recompute a prospective rate from the remaining depletable carrying amount and remaining supported units. Do not reassign cost from units already extracted solely because the estimate changed. If the earlier estimate used information improperly, investigate an error rather than forcing an estimate-change label.

Where this unit-rate model stops

The strongest temptation is to carry the general schedule directly into oil and gas. Do not. Full-cost and successful-efforts accounting determine which costs enter which pools before a depletion rate can be meaningful. Tax depletion answers a different tax-law question. If either label appears in a packet, stop this schedule and establish the industry, reporting basis, period, pool, and governing guidance first.

Exit check

Build a unit and dollar rollforward with beginning extracted inventory, current extraction, sales, and ending inventory. Recompute after a supported reserve revision and explain which amounts change prospectively. List the engineering and legal evidence the arithmetic cannot supply.