Sequoia (S Corporation) purchased the rights to cut timber on several tracts of land over a 15-year period. It paid $500,000 for cutting rights. A timber engineer estimates that 250,000 board feet of timber will be cut. During the current year, Sequoia cut 45,000 board feet of timber, which it sold for $900,000. 8. Using cost depletion method, what is Sequoia's depletion deduction for the current year? Cost Depletion Cost basis in timber 13 500,000 Estimated feet of timber 250,000 (3 Per-unit cost depletion rate 2 (1)/(2) (4 Year 1 units sold 45,000 (5 Year 1 cost depletion (90,000) (3) x (4) 8b.) What is the gross margin on the sale of timber? (900,000-90,000)/900,000 = 0.9 Sc.) If Sequoia has one shareholder, whose individual marginal ordinary tax rate is 24% and dividend tax rate is 20%, what is the tax owed on the sale of the timber if the business has no other deductible expenses.
Sequoia (S Corporation) purchased the rights to cut timber on several tracts of land over a 15-year period. It paid $500,000 for cutting rights. A timber engineer estimates that 250,000 board feet of timber will be cut. During the current year, Sequoia cut 45,000 board feet of timber, which it sold for $900,000. 8. Using cost depletion method, what is Sequoia's depletion deduction for the current year? Cost Depletion Cost basis in timber 13 500,000 Estimated feet of timber 250,000 (3 Per-unit cost depletion rate 2 (1)/(2) (4 Year 1 units sold 45,000 (5 Year 1 cost depletion (90,000) (3) x (4) 8b.) What is the gross margin on the sale of timber? (900,000-90,000)/900,000 = 0.9 Sc.) If Sequoia has one shareholder, whose individual marginal ordinary tax rate is 24% and dividend tax rate is 20%, what is the tax owed on the sale of the timber if the business has no other deductible expenses.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Sequoia (S Corporation) purchased the rights to cut timber on several tracts of land over a 15-year period. It paid
$500,000 for cutting rights. A timber engineer estimates that 250,000 board feet of timber will be cut. During the
current year, Sequoia cut 45,000 board feet of timber, which it sold for $900,000.
8. Using cost depletion method, what is Sequoia's depletion deduction for the current year?
Cost Depletion
Cost basis in timber
13
500,000
Estimated feet of timber
250,000
(3
Per-unit cost depletion rate
2
(1)/(2)
(4
Year 1 units sold
45,000
(5
Year 1 cost depletion
(90,000)
(3) x (4)
8b.) What is the gross margin on the sale of timber?
(900,000-90,000)/900,000 = 0.9
Sc.) If Sequoia has one shareholder, whose individual marginal ordinary tax rate is 24% and dividend tax rate is 20%,
what is the tax owed on the sale of the timber if the business has no other deductible expenses.
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