75. Last Chance Mine (LCM) purchased a coal deposit for

$750,000. It estimated it would extract 12,000 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1 million, $3 million, and $2 million for years 1 through 3, respectively. During years 1–3, LCM reported net income (loss) from the coal deposit activity in the amount of

($20,000), $500,000, and $450,000, respectively. In years 1–3, LCM actually extracted 13,000 tons of coal as follows:

(1) (2) Depletion

(2)/(1) Tons Extracted per Year Tons of Coal Basis Rate Year 1

Year 2

Year 3

12,000 $750,000 $62.50 2,000 7,200 3,800

a. What is LCM’s cost depletion for years 1, 2, and 3?

b. What is LCM’s percentage depletion for each year (the applicable percentage for coal is 10 percent)?

c. Using the cost and percentage depletion computations from parts

(a) and (b), what is LCM’s actual depletion expense for each year?