Note: You must show all work for each question in this Excel spreadsheet to receive credit for this assignment.
John Jones acquired the rights to the oil reserve located on a property outside of Tuscaloosa. John paid $500,000 for the
rights to the oil, and his engineers have determined that approximately 1,000 barrels of oil could be extracted from the oil
reserve through drilling activities. John expects the gross income from the property to be $400,000 in 2020, and taxable
income is expected to be $45,000. During 2020, John expects to extract 100 barrels of oil from the property.
Question 1: What is John's cost depletion for 2020?
Question 2: What is John's percentage depletion for 2020?
Question 3: Based on the answers to Questions 1 and 2, what is the depletion deduction for 2020?