In 2016,West Virginia Mining Co

question 12

Essay

In 2016,West Virginia Mining Co.purchased a coal mine that contained an estimated 1,200,000 tons of coal,of which 1,000,000 tons can be profitably extracted,for a cash price of $58,500,000.The company mined 50,000 tons of coal in 2016.
Required: a)What is the amount of depletion to be recorded per ton of coal?
b)What is the amount of depletion expense for 2016?

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Definitions:

Marginal Tax Rate

The rate at which the next dollar of taxable income is taxed.

Proportional Tax

A tax system where the rate of taxation is fixed, meaning the tax rate stays the same regardless of the taxable amount or income.

Average Tax Rate

The portion of total income that is paid as tax, calculated by dividing the total tax amount by the taxable income.

Tax Base

The total amount of assets or revenue that a government can tax to fund its operations and services.