Homework Answers
| Working Notes: | |||||||
| CALCULATION OF THE DEPLETION RATE PER UNIT | |||||||
| Purchase Cost of Mineral Rights | $ 35,00,000 | ||||||
| Less: Salvage Value = | $ - | ||||||
| Net Value for Depletion (A) | $ 35,00,000 | ||||||
| No. of Units Expected to Recoverable | 5,00,000 | Units | |||||
| Depreciation per Units = (A/B) | $ 7.00 | Per Unit | |||||
| SOLUTION : | |||||||
| CALCUATION OF DEPLETION DEDUCTION FOR THE YEAR 2020 | |||||||
| Depletion Deduction = | No. of Units Sold | X | Rate Per Unit | = | Depletion Deduction | ||
| Depletion Deduction = | 25,000 | X | $ 7.00 | = | $ 1,75,000 | ||
| Answer = Depletion Deduction = Option C = $ 175,000 | |||||||
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