sam jones owns a granite stone quarry when he acquired the land sam allocated 800 00 4373902

Sam Jones owns a granite stone quarry. When he acquired the land, Sam allocated $800,000 of the purchase price to the quarry’s recoverable mineral reserves, which were estimated at 10 million tons of granite stone. Based on these estimates, the cost depletion was $.08 per ton. In April of the current year, Sam received a letter from the State Department of Highways notifying him that part of his property was being condemned so that state could build a new road. At that time, the recoverable mineral reserves had an adjusted basis of $600,000 and 7.5 million tons of granite rock. Sam estimates that the land being condemned contains about 2 million tons of granite. Therefore, for the current year, Sam has computed his cost depletion at $:11 per ton [$600,000/(7,500,000 – 2,000,000)]. Evaluate the appropriateness of what Sam is doing. View Solution:
Sam Jones owns a granite stone quarry When he acquired

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