Unlike other depreciation methods that focus on the deterioration of physical assets, the depletion method recognizes the reduction in the quantity or reserves of the natural resource being extracted. It aims to match the expenses of resource extraction with the revenue generated from the sale of the resource. Depreciation is calculated taking the cost of
It looks like Lee picked a bad time to get into the lamp business. The costs of buying lamps for his inventory went up dramatically during the fall, as demonstrated under ‘price paid’ per lamp in November and December. So, Lee decides to use the LIFO method, which means he will use the price it cost him to buy lamps in December. As with FIFO, if the price to
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