1. value 10.00 points Texas Oil Company (TOC) paid $2,000,000 for an oil reserve estimated to hold 40,000 barrels of oil. Oil production is expected to be 8,000 barrels in year 1, 24,000 barrels in year 2, and 8,000 barrels in year 3 TOC expects to begin selling barrels from its oil inventory in year 4 Required: 1. Assuming these estimates prove to be accurate, show the balances in the oil reserve, accumulated depletion, and oil inventory accounts in each of the three years. Year 1 Year 2 Year 3 Oil Reserve Accumulated Depletion Oil Reserve, Net Oil Inventory 400,000 (400,000) 2. What effect does this yearly depletion have on the income statement? O These costs are removed from one asset (oil reserve) and capitalized in a different asset (oil inventory), so there is no effect on the income statement until the oil inventory is sold These costs are removed from one asset (oil reserve) and capitalized in a different asset (oil inventory), so there is no effect on the income statement even after the oil inventory is sold