@reasoning logic,
Not being quite sure of where you are going, I will repeat that Merchandise Inventory becomes an expense when, and only when it is sold. I will add that if it is expensed when sold, it cannot also be taken as either depreciation or depletion expense. That would be double counting of expense. Your auditor wouldn't like it, and neither would the IRS.
The only other way Merchandise Inventory can be expensed is through spoilage, shrinkage, or in a few cases by way of write down. For example, Walmart suddenly discovers a warehouse of 386 computers. They have lost value, and will never be worth more in the market than the value of the plastic they are made of.
I am not familiar with oil and gas depletion. I do understand that is complex and to use someone else's word, a bit loopy. There may be something in there that is worth examination.
@roger,
roger, As an ex-accountant, I can assure you that you are on "target."
@cicerone imposter,
Still, when it comes to inventory accounting, I will yield to you and realjohnboy.
@roger,
roger, Inventory accounting is more complicated than most accountants understand the subject. I worked with Florsheim Shoe Company as a traveling auditor for 3.5 years to learn all the tricks of the trade. There are ways to play with numbers when it comes to inventory, and it's almost impossible for outside auditors to catch on what's happening.
It cost me a little bit of my liver to go out with managers after work to drink to learn all that stuff, but was promoted to audit manager after 3.5 years.
@roger,
I have already agreed with you on what you are saying! "What I was hoping for was for you to poke holes in this logic if you are able to!
Quote:You might also take note of the fact, okie, that in the nineties, the major oil companies, concerned that they weren't making enough profit because there were too many independent refineries which were actually competing with them with the effect of lowering prices for refined oilm bought up most of those independent refineries and shut them down, and shut down some of their own, as well, with the natural effect of riging prices for refined oil, and increased profits for themselves. So much for free enterprise. I haven't seen any conservative outrage against that, or the often lobserved fact that the last thing most "free enterprise" wants is actual free enterprise--they want the system rigged to favor themselves, which is why they lobby Republicans endlessly with huge amounts of money. Newt Gingrich's invitation to companies to come in and write the bills themselves which would regulate them, for Congress to pass, springs to mind.
URL:
http://able2know.org/topic/47327-791
@cicerone imposter,
I am not an accoutant but I understand the more rules you have, the tax code, the more chance you have of people screwing over the tax code. We should have a code that states if you make $10,000 you pay 10% tax, if you make $100,000 you pay 39% tax. Our present system only lets the special interest groupes screw over all of us by paying the politicians in our government to grant them special rules to bypass paying their fair share of taxes. No more special rules for the bypassing of the special interest groupes to avoid their share of fair taxes. I am sure this will happen when hell freezes over!!!
I feel that the non-accountants here can benefit from some definitions:
Depletion is an accounting concept used most often in mining, timber, petroleum, or other similar industries. The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. Depletion is similar to depreciation in that, it is a cost recovery system for accounting and tax reporting. For tax purposes, there are two types of depletion; cost depletion and percentage depletion.
For mineral property, you generally must use the method that gives you the larger deduction. For standing timber, you must use cost depletion.[1]
According to the IRS Newswire,[2] over 50 percent of oil and gas extraction businesses use cost depletion to figure their depletion deduction. Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). For this purpose, the term “property” means each separate interest businesses own in each mineral deposit in each separate tract or parcel of land. Businesses can treat two or more separate interests as one property or as separate properties.
[edit]Types of depletion
Depletion, for United States tax purposes, (and accounting purposes) is a method of recording the gradual expense or use of natural resources over time. Depletion is the using up of natural resources by mining, quarrying, drilling, or felling.
Percentage depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year. The rates to be used and other conditions and qualifications for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells. Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits.[1]
Cost depletion Cost depletion is an accounting method by which costs of natural resources are allocated to depletion over the period that make up the life of the asset. Cost depletion is computed by (1) estimating the total quantity of mineral or other resources acquired and (2) assigning a proportionate amount of the total resource cost to the quantity extracted in the period. For example, Big Texas Oil, Co. discovers a large reserve of oil. The company has estimated the oil well will produce 200,000 barrels of oil. The company invests $100,000 to extract the oil, and they extract 10,000 barrels the first year. Therefore, the depletion deduction is $5,000 ($100,000 X 10,000/200,000).
@MontereyJack,
MontereyJack wrote:And yes, the oil companies do make themselves fat multi billion dollar profits even after they pay for all that expensive research and drilling and refining you so commiserate with them about.
So what? The government makes billions by taxing them, while they themselves do essentially nothing to produce any gas or oil. Why do you hate companies that produce something that we need?
Quote:.......the last thing most "free enterprise" wants is actual free enterprise--they want the system rigged to favor themselves, which is why they lobby Republicans endlessly with huge amounts of money.
Pure unadulerated ignorance about capitalism, MJB. You are entitled to your opinion, but it would be nice if liberals like yourself would educate yourselves about what free enterprise does produce. Gasoline is cheaper than bottled water. If the government tried to do it, how much would a gallon of gasoline cost, do you suppose? And besides, you don't have to buy it if you don't like it. You can ride a bicycle or walk.
@RABEL222,
Since we're not sure when hell will freeze over, it's best to keep your own financial house in order - to make sure you will survive this merry-go-round in old age.
@RABEL222,
Sounds good, but how do you define "if you make"? It just isn't that simple.
@okie,
Quote:You can ride a bicycle or walk.
And that's exactly what many of us do.
Are you just not going to address the point, that depletion allows oil companies to write off more on their taxes then they paid to drill the field in the first place?
Cycloptichorn
@realjohnboy,
realjohnboy wrote:
Good afternoon, Georgeob. You and I differ on stuff, but I look forward to your posts. You invest some effort in composing a thoughtful response. That is somewhat rare here.
What caught my eye in your most recent post - which I assume you wrote vs cut and paste - were these phrases regarding labor unions:
> the intransigence of labor unions
> the need to free our labor markets from the the asinine constraints of self-serving unions
> the current administration is in the grip of paymasters in organized labor.
I am paraphrasing of course, but you lay the blame for at least a part of our economic difficulty on the doorstep of unions.
I think that you are falling into the trap of finding labor unions to be a convenient whipping boy.
I googled in "% U.S. Labor force union members"
I cribbed stuff from various sites, mostly governmental. I would like a peer review of this:
> 14.7 million americans belong to unions which works out to 12% of the working population
> 7.6 million are in the public sector while 7.1 million are in the private sector
> 7% of the private sector employees belong to unions
> 36% of the public sector employees belong to unions
> The median pay for union members is $917/week vs $717/week for non-union members. I didn't find out anything about benefits.
> In 1983, union membership was 20% - 8 points higher then now.
Would you agree that that data is accurate? That would be a start.
Thank you.
I agree the data you posted looks accurate.
I have had a great deal of experience managing companies infested by labor unions - both metal trades (steelworkers, machinists, etc.) and building trades - and (as CEO) have overseen the negotiation of several collective bargaining agreements. I have lived through their pious rhetoric about "partnering with management" and what it actually means in the permanent hostile relationship, fostered by the unions to convince their membership that they get something useful for their dues. The first casualty of this is any sense of unifying purpose and goals in the company. Next are the steadily accumulating, mostly stupid, work rules and restrictions they work ceaselessly every day to spread and expand. The cumulative result is an entrenched workforce, without real motivation and interested only in gaming the system to get a few more breaks and stoutly resisting any efforts on the part of management to increase productivity, whether through better equipment or more efficient processes.
It is no secret why the most innovative and fast growing companies and industries in this country are free of union infestation. They are also generally much sought after as employers. Wonder why???
You should consider the very poor record private sector unions have in attempting to organize new companies or industries. They have been voted down innumerable times by workers in secret ballots (something the unions are attempting to get around with the help of the current administration). Note the stunning lack of union membership in right to work states where individual workers are left to decide whether they want to give 1.5% of their salary to the union. Same goes for government employees in those cases where states have enacted voluntary unionism for their workers. About the only growth unions have achieved have been through their paid Democrat hacks who have repeatedly enacted legislation that involuntarilly unionize whole departments and sectors of state, local and Federal governments. Unions exist and thrive only with a legally enforced government monopoly. Whenever workers have a choice they opt out en masse.
@cicerone imposter,
Its a term that means that it will never come to pass. And I realized a long time ago that someone in my financial slot cant rely on the government for an even break. I dont have the money to buy a politician.
@roger,
You take what you make in income subtract what it cost you to make it and that is income. It should be money made on money invested as well as money made on products. If all the special interest tax breaks were eleminated it would be simple or could be made simple.
@reasoning logic,
Quote:I think that we are headed in the same direction as the Roman empire!
Nothing like an ignorant population to take us that way.
The US is both a democracy AND a republic.
Anyone that argues they can't be both is ignorant.
Can something be an oak AND a tree?
Can someone be a man AND a Republican?
Democracy and Republic are not diametrically opposite concepts.
"Democratic Republic" is not an oxymoron.
Just one advise for those in the stock market; it's going to go up today based on bin Ladin's demise.
@parados,
But man and republican is.
@RABEL222,
From USA Today that I agree with on the stock market.
Quote:The killing of bin Laden, the mastermind of the 9/11 terror attacks that hit at the heart of the U.S. financial district, killed thousands and shut down the New York Stock Exchange for four days is likely to provide a short-term psychological boost to financial markets and a Wall Street community still mourning the losses suffered that day.
"It's bullish short term, both to celebrate … and also to reflect the likely long-run stability introduced by killing the head of this terror movement," says James Paulsen, chief investment strategist at Wells Capital Management.
Adds Paul Hickey, founder of Bespoke Investment Group: "It's great for the country and our psyche. It will provide a boost just like it did when we caught (Iraqi president) Saddam Hussein, because it's a victory against our number one enemy, but ultimately life goes on and the markets will focus on business."
It's trading at about the same level today (10AM).
Manufacturing rises for 21st straight month. Man, that Obamanomics just keeps trashing the economy, doesn't it H2 Oboy.
