Question

A relatively small privately owned coal-mining company has the sales results summarized below Determine the annual percentage depletion for the coal mine. Assume the company's taxable income is $140,000 each year. (Notice the percentage depletion amount is less than 50% of the company's taxable income) What is the percentage rate? a. Year Gross income Depletion Sales, tons Spot price, S/ton 9.68 sales amount 34,300 50,100 71,900 2 0.50 1.23

Answer 1

Depletion amount should be 15% of gross income or 50% net income which ever is less.

Year	Sales tons	Spot sales price,$/ton	Gross Income	15% of Gross income(A)	50% of Net income(B)	Depletion Amount(A) or (B) which ever is less
1	34300	9.68	332,024.00	49,803.60	70,000.00	49,803.60
2	50100	10.5	526,050.00	78,907.50	70,000.00	70,000.00
3	71900	11.23	807,437.00	121,115.55	70,000.00	70,000.00
			1,665,511.00			189,803.60