Question - On June 1, 2015 Hoover Mining Company paid $6,000,000 cash to purchase a mine with an estimated 20,000,000 tons of coal. In 2017, Hoover Company mined 400,000 tons of coal. What is the effect on the income statement and the statement of cash flows for 2017?
$120,000 depletion expense on the income statement; no effect on the statement of cash flows.
$120,000 depletion expense on the income statement; $120,000 cash outflow from operating activities.
$1,666,667 depletion expense on the income statement; $1,666,667 cash outflow from operating activities.
$1,666,667 depletion expense on the income statement; no effect on the statement of cash flows.