How is depletion calculated for natural resources?

Depletion for natural resources is calculated using a method that takes into account the cost of the resource, its expected salvage value, and the total amount of resource available for extraction. The correct calculation involves subtracting the salvage value from the total cost and then dividing that figure by the total amount of the resource. This calculation provides a per unit depletion rate, which can then be multiplied by the actual amount of the resource extracted during the period to find the total depletion expense.

Specifically, the formula involves taking the initial cost of the natural resource, subtracting any expected salvage value (the value of what's left once the resource has been extracted), dividing this adjusted cost by the total quantity of the resource (often measured in units such as gallons, tons, or barrels), and then multiplying by the actual amount extracted during the period. This approach ensures that the depletion expense reflects the actual usage of the resource in a systematic and rational manner throughout its useful life.

The other choices either incorrectly include the salvage value when it should be subtracted, use an incorrect fraction of the total supply, or misinterpret the calculations involved in determining the depletion. Hence, choice C accurately captures the correct method for calculating depletion, aligning with standard accounting practices regarding the treatment of natural resources