Question

Last Chance Mine (LCM) purchased a coal deposit for $1,055,700. It estimated it would extract 15,300 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1.26 million, $10.8 million, and $9 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 ($18,900), $570,000, and $552,500, respectively. In years 1–3, LCM actually extracted 16,300 tons of coal as follows: (Leave no answer blank. Enter zero if applicable. Enter your answers in dollars and not in millions of dollars.)

(1)	(2)	Depletion (2)/(1)	Tons Extracted per Year
Tons of Coal	Basis	Rate	Year 1	Year 2	Year 3
15,300	$1,055,700	$69.00	2,900	9,300	4,100

a. What is LCM's cost depletion for years 1, 2, and 3?

YEAR	COST DEPLETION
1
2
3

Answer 1

Answer Page: No @ LCM's col depletion for years lab and 3 Year! LCM's cost depletion No. of tons eztached x Depletion rate por year 2900 x $69 $ 200,100 Year a LCM's cost depletion = No of tons extracted x depletion rate per year 9300 x $69 $641,700 Year 3 Amortization is limited to cost basis, LCH's coof depletion = $1,055,700 - $200100 – 641700 $213,900 Particular Year! Year 2 Year 3 No. of tons extracted 2900 9300 4100 Depletion rate per year $ 69 $69 $69 LCM's cost depletion $200,100 $6441,700 013,900