Flossil Fossils Company Purchased a Tract of Land Containing Coal

question 89

Essay

Flossil Fossils Company purchased a tract of land containing coal in 2013 for $20,000,000 and then spent $30,000,000 to get a mine ready for operation.The company estimates that there will be 10,000,000 tons of coal available over the next 10 years.The land has a residual value of $500,000.During 2013,1,000,000 tons of coal were mined.
A) Compute the cost of the natural resource and the depletion rate.
B) Record the jounnal entry for the 2013 depletion.

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Definitions:

Relationship Test

A criterion used in tax law to determine eligibility for dependent-related deductions and credits, based on the taxpayer's relationship to the dependent.

Member of Household Test

A criteria used to determine if someone is a qualifying relative for tax purposes, considering factors like relationship, income, and support.

Qualifying Relatives

Individuals who meet certain IRS criteria allowing a taxpayer to claim them as dependents for tax purposes, potentially reducing taxable income.

Head of Household Status

A tax filing status available to unmarried taxpayers who provide a home for certain qualifying persons and pay more than half of home maintenance expenses.