Question

2) Four years ago, Hyperloop Transportation Technologies paid $5 billion for rights to remove vibranium from Wakanda for use in the fabrication of passenger pods. The yearly amounts removed in grams are 275,000; 250,000; 320,000; and 425,000. Vibranium prices per gram over the 4 years have averaged $9,400, $9,550, $9,785, and $10,000 annually. Use percentage depletion to compute the annual depletion amount based on a 22% allowance.

Answer 1

Under percentage depletion method the annual depletion amount is calculated by multiplying annual revenue in a tax year from extracting a resource by IRS determined percentage established for each resource(for this case it is 22%)

Year		Revenue(in million)	depletion amount(22%)
1.	275000×$9400	2585.0	$568.700
2.	250000×$9550	2387.5	$525.250
3.	320000×$9785	3131.2	$688.864
4.	425000×$10000	4250.0	$935.000

*Answer is in millions

For any query please comment in the comment box