An oil well cost $2,020,000 and is calculated to hold 260,000 barrels of oil
There is no residual value. Which journal entry is needed to record the expense for the extraction of 45,000 barrels of oil during the year? All 45,000 barrels were sold ding the year. (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A)
Depletion Expense - Oil 349,650
Accumulated Depletion - Oil 349,650
B)
Depletion Expense - Oil 349,650
Oil Revenue 349,650
C)
Cost of Goods Sold - Oil 349,650
Accumulated Depletion - Oil 349,650
D)
Oil Reserve Inventory 349,650
Accumulated Depletion - Oil 349,650
A .Depletion per unit = (Cost - Residual value) / Estimated total units
Depletion per unit = ($2,020,000 ) / 260,000
Depletion per unit = $8
Depletion expense = Depletion per unit x Number of units extracted
Depletion expense = $8 x 45,000
Depletion expense = $349,650
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