Answer to Question #266855 in Civil and Environmental Engineering for nato

Question #266855

A sand and gravel pit purchased for $900,000 is expected to yield 50,000 tons of gravel and 80,000 tons of sand per year. The gravel will sell for $6 per ton and the sand for $9 per ton. (a) Determine the depletion charge according to the percentage depletion method. The percentage depletion rate for sand and gravel is 5%. (b) If taxable income is $100,000 for the year, is this depletion charge allowed? If not, how much is allowed?  


1
Expert's answer
2021-11-17T03:16:01-0500



"(a) Income \n=\n50\n,\n000\n(\n6\n)\n+\n80\n,\n000\n(\n9\n)\n\n=\\$\n1\n,\n020\n,\n000"

Depletion charge= "=1,020,000(0.05)= \\$\n51\n,\n000"

"(b) No, only \\space \n50 \\%\\space of \\space taxable\\space income, or \\$\n50\n,\n000, is \\space allowed."

"16.39CDt=9,000,000\/280,000"

"=\\$32.14 \\space per \\space ton"


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