Neakanie Industries sells specialized mountain bikes. Each specialized bike purchased includes free maintenance service for 12 m
onths. The price of the specialized bike is $700. When sold separately, a maintenance contract is $200 and a comparable but non-specialized bike is $600. What amount of revenue will Neakanie recognize at the date of sale for each bike
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Answer: $160,000
Explanation:
To find the depletion rate per ton:
= ( Cost - residual value) / Capacity in tons
= (960,000 - 0) / 240,000
= $4 per ton
During the first year, the extraction was 40,000 tons. Thus, the depletion amount is:
= 40,000 * 4
= $160,000
