Eula Owns a Mineral Property That Had a Basis of $23,000

question 44

Multiple Choice

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year.Cost depletion is $19,000.The property qualifies for a 15% depletion rate.Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000.What is Eula's tax preference for excess depletion?

• A)$15,000
• B)$23,000
• C)$25,000
• D)$0
• E)None of these

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Definitions:

Total Assets

The sum of all assets owned by a company, including current, fixed, and intangible assets, as reported on the balance sheet.

Capacity Utilization

The percentage of a firm or industry's total production capacity that is actually being used over a specific period.

Plug Variable

A variable that is used in financial modeling to make the balance sheet balance, often representing the financing needed or surplus cash.

External Financing

Funds that a business obtains from outside sources to finance its operations, growth, or projects, which can include loans, equity investments, and bonds.