Natural Extraction Industries paid $4 million for the right to drill for oil on a tract of

Question:

Natural Extraction Industries paid $4 million for the right to drill for oil on a tract of land in western Taxes. Engineers estimated that this oil deposit would produce 100,000 barrels of crude oil.

a. During the first year of operations, Natural Extraction extracted 30,000 barrels of oil. Prepare the entry to record depletion for the first year.

b. During the second year, the company extracted 50,000 barrels. Prepare the entry to record depletion for the second year.

c. What dollar amount would Natural Extraction report on its balance sheet at the end of the second year for oil deposits?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...