Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 32P
To determine
Calculate the depletion allowance.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Show the complete solution for the following:
1. The Saudi Arabian Oil Refinery developed an oil at an initial cost of $ 50,000,000. What is the depletion charge during the year where it produces half million barrels of oil? Use Unit or Factor method in computing depletion.
The Michigan Mining Company has acquired a coal mine for a cost of $4,500,000. No other costs are involved. The total coal expected to be extracted from the mine is 35,000 tons. During the year 2018, the total extraction of coal is 5,700 tons. There is no salvage value. Required: Using the above information compute: the depletion rate per tone of coal extracted. The depletion charge of the coal extracted during the year 2018.
MalMax purchased a depreciable asset. What would be the difference in total assets at the end of the first year if MalMax chooses straight-line depreciation versus double-declining-balance depreciation?
Chapter 9 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - Prob. 10P
Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - Prob. 27PCh. 9 - Prob. 28PCh. 9 - Prob. 29PCh. 9 - Prob. 30PCh. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33PCh. 9 - Prob. 34PCh. 9 - Prob. 35PCh. 9 - Prob. 36PCh. 9 - Prob. 37PCh. 9 - Prob. 38PCh. 9 - Prob. 39PCh. 9 - Prob. 40PCh. 9 - Prob. 41PCh. 9 - Prob. 42PCh. 9 - Prob. 43PCh. 9 - Prob. 44PCh. 9 - Prob. 45PCh. 9 - Prob. 46PCh. 9 - Prob. 47PCh. 9 - Prob. 48PCh. 9 - Prob. 49PCh. 9 - Prob. 50PCh. 9 - Prob. 51PCh. 9 - Prob. 52PCh. 9 - Prob. 53PCh. 9 - Prob. 1STCh. 9 - Prob. 2STCh. 9 - Prob. 3STCh. 9 - Prob. 4ST
Knowledge Booster
Similar questions
- Carrolton Oil and Gas, an independent oil and gas producer, is approved to use a 20% of gross income depletion allowance. The write-off last year was $700,000 on its horizontal directional drill wells. Determine the estimated total reserves in barrels if the volume pumped last year amounted to 1% of the total and the delivered product price averaged $40 per barrel.arrow_forwardCompany XYZ operates in the mining industry and extracts a non-renewable resource. The company is eligible for a depletion allowance of 10% on its gross income from the resource extraction. In the current year, the company generated a gross income of $500,000 from the resource. Calculate the depletion allowance for Company XYZ.arrow_forwardA corporation in 2018 expects a gross income of $680,000, total operating expenses of $480,000, and capital investments of $29,000. In addition the corporation is able to declare $53,000 of depreciation charges for the year. The federal income tax rate is 21%. What is the expected taxable income and total federal income taxes owed for the year 2018?arrow_forward
- In Straight Line depreciation, the book value at the end of the depreciable life is equal to the salvage value used to calculate the yearly depreciation amount. TRUE OR FALSEarrow_forwardI need help in figuring out the step by step procedure, performing the operations and calculations manually, using formulas. One year ago, your company purchased a machine used in manufacturing for $110,000. The current machine is expected to produce EBITDA of $20,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current machine is $10,000 per year. The market value today of the current machine is $50,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $150,000 today. It will be depreciated on a straight-line basis over 10 years, after which it has no salvage value. You expect that the new machine will produce EBITDA (earning before interest, taxes, depreciation, and amortization) of $40,000 per year for the next 10 years. All other expenses of the two machines are identical.Your company’s tax…arrow_forwardA builder paid $120,000 for a house and lot. The value of the land was appraised at $65,000, and the value of the house at $55,000. The house was then torn down at an additional cost of $8,000 so that a warehouse could be built on the lot at a cost of $50,000. What is the total value of the property with the warehouse? For depreciation purposes, what is the cost basis for the warehouse?arrow_forward
- An asset is purchased for P 120,000,00. Its estimated life is 10 years, after which it will be sold for P 12,000,00. Find the depreciation for the second year using SOYD method.arrow_forwardABC Company makes its policy that for every new piece of equipment purchased, the annual depreciation should not exceed 25% of the first cost at any time without salvage value. determine the length of service if the depreciation used is the Double Declining Balanced method.arrow_forwardABC Corporation makes its policy that for every new equipment purchased, the annual depreciation should not exceed 20% of the first cost at any time without salvage value. Determine the length of service if the depreciation used is the SOYD Method.arrow_forward
- Lynn Construction Company had a gross income of $34,000,000 in tax-year 1,$5,000,000 in salaries, $4,000,000 in wages, $1,000,000 in depreciation expenses, a loan principal payment of $200,000, and a loan interest payment of $210,000.(a) What is the marginal tax rate for Lynn Construction in tax-year 1?(b) What is the average tax rate in tax-year 1?(c) Determine the net income of the company in tax-year 1.arrow_forwardYou are building guest huts at a holiday resort, and you need to choose whether to build your huts out of straw, wood, or brick. Straw is the cheapest but depreciates the most quickly; brick is the most expensive but depreciates least; wood is intermediate. Assume that all types of huts are equally picturesque/functional. They differ only in terms of durability. The cost (and depreciation rates) of the different hut types is: - Brick: £3,500 (10% depreciation) - Wood: £3,000 (15% depreciation) - Straw: £2,500 (20% depreciation) a) The interest rate is 5%, which type of hut should you buy? b) The interest rate is 20%, which type of hut should you buy? c) Intuitively, why were the answers for parts (a) and (b) different? Explain in words.arrow_forwardRevenues generated by a new fad product are forecast as follows: Year Revenues 1 $ 40,000 2 30,000 3 20,000 4 10,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $45,000 in plant and equipment. Required: What is the initial investment in the product? Remember working capital. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 40%, what are the project cash flows in each year? If the opportunity cost of capital is 12%, what is project NPV? What is project IRR?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning