Rick Purchased a Uranium Interest for $10,000,000 on January 3,2014,when

question 23

Essay

Rick purchased a uranium interest for $10,000,000 on January 3,2014,when recoverable reserves were estimated at 200,000 units.A total of 10,000 units were extracted in 2013 and 7,000 units were sold in 2014.Gross income from the property was $2,800,000 and taxable income without the allowance for depletion was $1,000,000.Determine the depletion deduction for 2014.

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Definitions:

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies with production volume, such as utility costs in a factory.

Product Costs

Costs directly associated with the manufacturing of goods, including direct materials, direct labor, and manufacturing overhead.

Absorption Costing

A financial method that integrates all production-related costs — direct materials, direct labor, and both variable and fixed overheads — into the cost calculation of a product.