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 $145,000 each year.

Year	Sales, Tons	Spot Sales Price, $/Ton
1	34,300	9.82
2	50,100	12
3	71,900	11.23

Year	Gross Income, $	Depletion amount	50% of the taxable amount	Allowed Depletion
1
2
3

Answer 1

	A	B	A*B=C	D=C*10%
Year	sales in tonn	rate per tonn	Gross Income	% Depletion	Taxable Income 145000*0.5	Allowed Depletion
1	34,300	9.82	336,826	33,682.6	72,500	33,682.6
2	50,100	12	601,200	60120.0	72,500	60,120
3	71,900	11.23	807,437	80,743.7	72,500	72,500

Assume depletion amount=gross income*10%

(assume depletion at10%)