Cavallo Company Acquired a Tract of Land Containing an Extractable

Multiple Choice

Cavallo Company acquired a tract of land containing an extractable natural resource.Cavallo is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource.Geological surveys estimate that the recoverable reserves will be 2,500,000 tons and that the extraction will be completed in five years.Relevant cost information follows: What should be the depletion charge per ton of extracted material?

A) $4.00
B) $4.37
C) $3.97
D) $3.60