A gold mine with an estimated deposit of 300,000 ounces of gold has a basis of $30 million (cost minus land value). The mine has a gross income of $16,425,000 for the year from selling 45,000 ounces of gold (at a unit price of $365 per ounce). Mining expenses before depletion equal $12,250,000. Compute the percentage depletion allowance. Would it be advantageous to apply cost depletion rather than percentage denletion?
A gold mine with an estimated deposit of 300,000 ounces of gold has a basis of $30 million (cost minus land value). The mine has a gross income of $16,425,000 for the year from selling 45,000 ounces of gold (at a unit price of $365 per ounce). Mining expenses before depletion equal $12,250,000. Compute the percentage depletion allowance. Would it be advantageous to apply cost depletion rather than percentage denletion?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 2E
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