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# Depletion is the process of allocating the cost of an

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SVP
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Depletion is the process of allocating the cost of an [#permalink]  02 Jul 2004, 10:14
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100% (01:29) correct 0% (00:00) wrong based on 2 sessions
Depletion is the process of allocating the cost of an investment in natural resources through systematic charges to income as the supply of the physical asset reduces the course of operations.

(A) systematic charges to income as the supply of the physical asset reduces the course
(B) systematic charges to income whereas the supply of the physical asset is reduced in the course
(C) systematic charges for income as the supply of the physical asset is reduced in the course
(D) systematic charges to income as the supply of the physical asset is reduced in the course
(E) systematic charges to income whereas the supply of the physical asset reduces the course

(c) stolyar
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whereas is not correct here.. whereas is usually followed by an alternative or an opposing view point.

C might be incorrect. .. charge to "credit card" , charge to "debit card, charge to "income" ( wish i could explain better )

IMO, D is best.

Stolyar, this sentence is very close to the definition of depreciation.

Praet
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I choose D.

the sentence will be:

Depletion is the process of allocating the cost of an investment in natural resources through systematic charges to income (becuse) as the supply of the physical asset is reduced in the course of operations.
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Furthermore [#permalink]  02 Jul 2004, 11:49
First of all, regarding to this question,
1. Charge(noun or verb) can be used with prepostion with, for, and to. In my opinion, "charge to+ somebody or account such as, checking account" are used for express meaning that some duty is imposed to some body, whereas "charge for+something" means expense or pay for acquring someting. Therefore, in this question, "charge for" might be correct, because "industry charge for earning income."
2. I think that in this question, "as" does not mean because, but means "during the course of operation, more reduced"
Hence, I think "c" would be correct.

Second, I am an international, therefore, it is not easy to distinguish correct pronoun. I might have seen the question that require me to distinguish "through" from "by" or "by means of".
Who does explain about the difference?

Thanks
Director
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my FA is A

There does not seem (to me!) to be any mistake in the given sentence
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D it is
"charge to" means "charged against income"
I believe what Stolyar meant by (c) is copyright which can be typed as
Hmm, seems like it works only in word documents.
Yes Praet, depletion is the equivalent of depreciation but it applies mainly to natural resources which can be depleted (lumber, natural gas, oil) whereas depreciation applies mainly to financial assets
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Paul

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Re: SC: depletion [#permalink]  02 Jul 2004, 12:29
D for me.
systematic charges to income --> attributed to or put on an account of.
Depletion links to reduction in supply of assets in the course.
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Paul wrote:
D it is
"charge to" means "charged against income"
I believe what Stolyar meant by (c) is copyright which can be typed as
Hmm, seems like it works only in word documents.
Yes Praet, depletion is the equivalent of depreciation but it applies mainly to natural resources which can be depleted (lumber, natural gas, oil) whereas depreciation applies mainly to financial assets

Yes, it is D. I took it from my financial accounting lessons, which I attended as a pre-MBA practice. BTW, there is yet another form of allocating costs against incomeâ€”amortization. This term is applied when we deal with intangible assets, such as goodwill, patents, or copyrights.

For those who are interested, I can give a small example of amortization: On 1/1/2004 company buys a certain patent for $60 000. Its useful life is 10 years; the annual amortization is therefore$6000. The entries in 2004 will be:

1/1/2004

Patent 60 000
Cash 60 000
To record costs of acquiring patent

12/31/2004

Patent Expense (Amortization) 6000
Patent 6000
To record patent amortization
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