Question

In: Accounting

Exercise 8-30 (Algorithmic) (LO. 8) Jebali Company reports gross income of $874,600 and other property-related expenses...

Exercise 8-30 (Algorithmic) (LO. 8)

Jebali Company reports gross income of $874,600 and other property-related expenses of $568,490 and uses a depletion rate of 19%.

Jebali Company depletion allowance is $ ?

Solutions

Expert Solution

Depletion Allowance- Depletion allowance is like depreciation allowance. It is a form of cost recovery of capital investment made in the business of natural resources and minerals. It is applicable when one has an economic interest in mineral property. When the minerals are extracted from land, the land value reduces. So natural resources and mines lost their value over the passage of time due to extraction of minerals so that types of property are entitled for depletion deduction.
Depletion deduction is allowable on tow basis.
(‘1) Cost depletion- In this method actual capital investment cost are recovered throughout the period of income generation from that property. The cumulative recovery made cannot exceed the original capital investment.
(‘2) Percentage depletion allowance- In this method depletion allowance is calculated as a percentage of gross income generated by the property during the year in question. The maximum deduction is limited to the lesser of following
(‘a) 100 % of taxable income from the property without considering depletion allowance or (‘b) 65 % of taxable income from all sources without considering depletion allowance.
It is to be noted that cumulative depletion allowance in this method may exceed the original capital investment of property.
Calculation of depletion allowance of Jebali Company
Gross Income 874,600
Multiplied by depletion rate 19%
Depletion allowance for current year 166,174

Related Solutions

Exercise 28-12 (Algorithmic) (LO. 1) The entity reports the following transactions for the 2019 tax year....
Exercise 28-12 (Algorithmic) (LO. 1) The entity reports the following transactions for the 2019 tax year. The trustee accumulates all accounting income for the year. Operating income from a business $845,000 Dividend income, all from U.S. corporations 50,700 Interest income, City of San Antonio bonds 6,760,000 Fiduciary fees, deductible portion (25,350) Net rental losses, passive activity (169,000) have to access tax table for this problem. Carryout the tax computations to two decimal places and round the final tax liability to...
Exercise 15-20 (Algorithmic) (LO. 5) Yanni, a single individual, reports the following information for the tax...
Exercise 15-20 (Algorithmic) (LO. 5) Yanni, a single individual, reports the following information for the tax year. Salary $115,600 State income taxes 11,560 Mortgage interest expense 10,404 Charitable contributions 2,312 Interest income 1,734 Personal exemption 4,050 Click here to access the exemption table. If required, round your answers to the nearest dollar. Compute the following for Yanni. a. Regular taxable income: $ b. AMT base: $ c. Tentative minimum tax: $
The Millicent Trust reports 2018 gross rent income of $200,000, expenses attributable to the rents of...
The Millicent Trust reports 2018 gross rent income of $200,000, expenses attributable to the rents of $110,200 and tax-exempt interest from state bonds of $10,000. Under the trust agreement, the trustee is to pay 15% of the annual trust accounting income to the Salvation Army, a qualifying charitable organization. If required, round any division to two decimal places. Round your final answer to the nearest dollar. The charitable contribution deduction allowed for 2018 is ?
Exercise 2-32 (Algorithmic) (LO. 4) Compute the income tax liability for each of the following unrelated...
Exercise 2-32 (Algorithmic) (LO. 4) Compute the income tax liability for each of the following unrelated C corporations. Click here to access the tax table to use for this problem. a. Darter Corporation has taxable income of $69,700. $ b. Owl Corporation has taxable income of $13,948,000. $ c. Toucan Corporation, a personal service corporation, has taxable income of $365,000. $
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO 8-7, LO8-9, LO 8-10 Endless Mountain Company manufactures a single product that is popular with recreation enthusiasts. The company sells its product to retailers throughout the quadrant of the United States. It is in the process of creating a master budget for reports a balance sheet as December 31, 2016 as follows: Endless Mountain Company Balance Sheet December 31, 2016 Assets Current Assets: Cash...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO 8-7, LO8-9, LO 8-10 Endless Mountain Company manufactures a single product that is popular with recreation enthusiasts. The company sells its product to retailers throughout the quadrant of the United States. It is in the process of creating a master budget for reports a balance sheet as December 31, 2016 as follows: Endless Mountain Company Balance Sheet December 31, 2016 Assets Current Assets: Cash...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO 8-7, LO8-9, LO 8-10 Endless Mountain Company manufactures a single product that is popular with recreation enthusiasts. The company sells its product to retailers throughout the quadrant of the United States. It is in the process of creating a master budget for reports a balance sheet as December 31, 2016 as follows: Endless Mountain Company Balance Sheet December 31, 2016 Assets Current Assets: Cash...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO...
Integration Exercise 9 Master Budgeting. LO 8-2, LO 8-3, LO 8-4, LO 8-5, LO 8-6, LO 8-7, LO8-9, LO 8-10 Endless Mountain Company manufactures a single product that is popular with recreation enthusiasts. The company sells its product to retailers throughout the quadrant of the United States. It is in the process of creating a master budget for reports a balance sheet as December 31, 2016 as follows: Endless Mountain Company Balance Sheet December 31, 2016 Assets Current Assets: Cash...
Exercise 3-26 (Algorithmic) (LO. 7) In 2017, Simon, age 12, has interest income of $860 and...
Exercise 3-26 (Algorithmic) (LO. 7) In 2017, Simon, age 12, has interest income of $860 and dividend income of $4,700. He has no investment expenses. His parents have taxable income of $87,000 and file a joint tax return. Assume that no parental election is made. Click here to access the 2017 tax rate schedule. If required, round the tax liability the nearest dollar. Net unearned income is $. Allocable parental tax is $. Simon's total tax is $.
Problem 11-5 (Algorithmic) Special Deductions and Limitations (LO 11.3) Fisafolia Corporation has gross income from operations...
Problem 11-5 (Algorithmic) Special Deductions and Limitations (LO 11.3) Fisafolia Corporation has gross income from operations of $426,600 and operating expenses of $362,610 for 2018. The corporation also has $42,660 in dividends from publicly traded domestic corporations in which the ownership percentage was 45%. Below is the Dividends Received Deduction table to use for this problem. Percent Ownership 2018 Dividends Received Percentage Less than 20 percent 50% 20 percent or more, but less   than 80 percent 65% 80 percent or...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT