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2 April, 22:10

Last Chance Mine (LCM) purchased a coal deposit for $750,000. It estimated it would extract 12,000 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1 million, $3 million, and $2 million for years 1 through 3, respectively. During years 1-3, LCM reported net income (loss) from the coal deposit activity in the amount of ($20,000), $500,000, and $450,000, respectively. In years 1-3, LCM actually extracted 13,000 tons of coal as follows:

Depletion (2) /

(1) Tons of Coal (2) Basis Depletion (2) / (1) Rate Tons Extracted per Year Year 1 Year 2 Year 3

12,000 $750,000 $62.50 2,000 7,200 3,800

Required:

a. What is LCM's cost depletion for years 1, 2, and 3?

b. What is LCM's percentage depletion for each year (the applicable percantage for coal is 10%) ?

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Answers (1)
  1. 2 April, 22:22
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    Answer: Holey
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