Western Virginia Coal Co. expects to produce 125,000 tons of coal annually for 15 years. The deposit cost $2.25 million to acquire, the annual gross revenues are expected to be $7.50 per ton in the net revenues are expected to be $5.25 per ton. Percent for Coal is 10%.

A. compute the annual depletion on a cost basis.

B. Compute the annual depletion on a percentage basis.

C. Which method would give the better deduction? Percent or cost.