Question

Which method of depreciation is suggested for coal mines?

• A. Diminishing balance
• B. Fixed instalment method
• C. Sum of year's digits method
• D. Depletion method

Answer 1

The correct option is D Depletion method

Depletion is the systematic allocation of the costs related to natural resources like minerals, precious metals, wood, etc. Such natural resources are known as wasting assets. Depreciation of such wasting assets is known as depletion. As coal mines are also wasting assets, the depletion method is used for their depreciation.