Last chance mine (lc) purchased a coal deposit for $720,000. it estimated it would extract 12,000 tons of coal from the deposit. lc mined the coal and sold it reporting gross receipts of $1 million for year 1. during year 1, lc reported net income from the coal deposit activity in the amount of $80,000. in year 1, lc actually extracted 2,000 tons of coal. what is last chance's percentage depletion for year 1 (the applicable percentage for coal is 10 percent) ?

Question

Business

Dalton Hayden

13 March, 21:50

Last chance mine (lc) purchased a coal deposit for $720,000. it estimated it would extract 12,000 tons of coal from the deposit. lc mined the coal and sold it reporting gross receipts of $1 million for year 1. during year 1, lc reported net income from the coal deposit activity in the amount of $80,000. in year 1, lc actually extracted 2,000 tons of coal. what is last chance's percentage depletion for year 1 (the applicable percentage for coal is 10 percent) ?

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Answers (1)

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Barbara Norman · Answer 1

The answer to this question is $100,000

Explanation:

From the question given. let recall the following,

Lat chance mine purchased a coal deposit for = $720,000

The estimated would extract 12,000 tons of coal from the deposit

The last chance mine the coal and sold it with reporting gross receipts of = $1,000,000

The reported net income from the coal deposit activity is = $80,000

Now let us find the percentage depletion

Percentage depletion is defined as the deduction in tax for the devaluation permitted in business in removing minerals, fossil fuels from the earth

The percentage of depletion is analysed or determined by multiplying the total sales by the percent allowed by the IRS

Which is,

$1,000,000 x 10% = $100,000