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

Question

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?  

Answer 1

$(a) Income = 50 , 000 ( 6 ) + 80 , 000 ( 9 ) =\$ 1 , 020 , 000$

Depletion charge= $=1,020,000(0.05)= \$ 51 , 000$

$(b) No, only \space 50 \%\space of \space taxable\space income, or \$ 50 , 000, is \space allowed.$

$16.39CDt=9,000,000/280,000$

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