Question 2 (16 points). An ore deposit is estimated to have 2,500,000 ounces of silver....
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Question 2 (16 points). An ore deposit is estimated to have 2,500,000 ounces of silver. Assume that the purchase price plus exploration costs are $4,200,000, silver can be sold for $16/ounce, the operating costs is $8/ounce, 10% Royalties, and depreciation of $250,000 for year 1. If 200,000 ounces are produced in year 1, what is the depletion deduction for this year? Specifically, calculate: a) Statutory depletion b) (50% max limit c) Cost depletion, and. d) Depletion allowance for year 1 Question 2 (16 points). An ore deposit is estimated to have 2,500,000 ounces of silver. Assume that the purchase price plus exploration costs are $4,200,000, silver can be sold for $16/ounce, the operating costs is $8/ounce, 10% Royalties, and depreciation of $250,000 for year 1. If 200,000 ounces are produced in year 1, what is the depletion deduction for this year? Specifically, calculate: a) Statutory depletion b) (50% max limit c) Cost depletion, and. d) Depletion allowance for year 1
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