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: (Leave no answer bl

Answer:The method used to recover costs of investment in natural resources like oil refinery, mining, timber forest is referred to as depletion.a)                                          Year 1             Year 2         Year 3Tons extracted                  2,000               7,200            2,800 Depletion rate                 $62.50             $62.50          $62.50   Cost depletion expense  $125,000       $450,000         $175,000Note: the extract tons of coal from the deposit is limited to 12,000. So, 1,000 tons extract is deducted in the last year.b. Percentage depletion: This is a method of computing depletion amount based on percentage depletion rates. Percentage depletion is computed by multiplying the gross income obtained from extraction with fixed percentage depletion rates. Calculate LC’s percentage depletion for each year.[Find the figure in the attachment] Note: The percentage depletion is not limited to the basis in the property. c. Compute LC’s actual depletion expense for each year.[Find the figure in the attachment]