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 Texas. 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?
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Step by Step Answer:
a Compute the depletion expenses for the first year using the equation as shown below Depletion expe...View the full answer
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