Charles Purchases an Interest in a Uranium Mine for $2,500,000

question 107

Multiple Choice

Charles purchases an interest in a uranium mine for $2,500,000 on June 7,2017.Recoverable tonnage is estimated at 500,000.During 2017,25,000 tons are mined and sold for $800,000.Charles incurs $500,000 of expenses during 2017.The percentage depletion rate for uranium is 22%.What is the depletion deduction for 2017?

• A)$125,000
• B)$150,000
• C)$176,000
• D)$200,000
• E)$250,000

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Definitions:

Variable Cost

Costs that vary in direct proportion to changes in the level of production or activity within a business.

Carrying Cost

The total cost of holding inventory, including storage, insurance, and taxes, among other expenses.

Fixed Cost

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Product

Anything that can be offered to a market to satisfy the desire or need of a customer.