Mr. Gates bought an interest in zine ore assets for S45,000. It was estimated that the recoverable amount of zine orewas 22,000 Ibs. In the first year of operation, Mr. Gates received gross income of $18,000 from the sale of 1,200Ibs. of zinc ore recovered in the first year. He incurred expense of $1.500 to recover the ore.% depletion allowance applicable to zinc ore is 22% of gross income. Also, the % depletion allowance cannotexceed 50% of taxable income computed without the depletion deduction.Compute Mr. Gates' depletion allowance for the year.(Hint: Cost of Depletion in the first year is the original cost prorated by the percentage of the ore recovered in thefirst year to the total recoverable ore amount. Taxable income is gross income less expenses. Then choosebetween i) the cost of depletion and i) the permissible % depletion allowance.)

Gross income = $ 18000 Less: Expenses = ($ 1200)…

Mr. Gates bought an interest in zine ore assets for S45,000. It was estimated that the recoverable amount of zinc ore was 22,000 Ibs. In the first year of operation, Mr. Gates received gross income of $18,000 from the sale of 1,20 Ibs. of zinc ore recovered in the first year. He incurred expense of $1.500 to recover the ore. % depletion allowance applicable to zinc ore is 22% of gross income. Also, the % depletion allowance canno exceed 50% of taxable income computed without the depletion deduction. Compute Mr. Gates' depletion allowance for the year. (Hint: Cost of Depletion in the first year is the original cost prorated by the percentage of the ore recovered in the first year to the total recoverable ore amount. Taxable income is gross income less expenses. Then choose between i) the cost of depletion and i) the permissible % depletion allowance.)

Mr. Gates bought an interest in zine ore assets for S45,000. It was estimated that the recoverable amount of zinc ore was 22,000 Ibs. In the first year of operation, Mr. Gates received gross income of $18,000 from the sale of 1,20 Ibs. of zinc ore recovered in the first year. He incurred expense of $1.500 to recover the ore. % depletion allowance applicable to zinc ore is 22% of gross income. Also, the % depletion allowance canno exceed 50% of taxable income computed without the depletion deduction. Compute Mr. Gates' depletion allowance for the year. (Hint: Cost of Depletion in the first year is the original cost prorated by the percentage of the ore recovered in the first year to the total recoverable ore amount. Taxable income is gross income less expenses. Then choose between i) the cost of depletion and i) the permissible % depletion allowance.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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