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 extracted 13,000 tons of coal as follows: (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 Using the cost and percentage depletion computations from parts (a) and (b), what is LCM's actual depletion expense for each year?

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 extracted 13,000 tons of coal as follows: (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 Using the cost and percentage depletion computations from parts (a) and (b), what is LCM's actual depletion expense for each year?

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 56P

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(1) Tons of Coal	(2) Basis	Depletion (2) ÷ (1) Rate	Tons Extracted per Year
12,000	$ 750,000	$ 62.50	2,000	7,200	3,800

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