An oil field is purchased for $6,000,000. No salvage value is expected. The estimated recoverable amount of oil is 250,000 barrels. During the year just ended, 27,000 barrels of oil were extracted and sold.

Required:

1. Compute the depletion rate. Show your computations.

Depletion Rate $per barrel

2. Prepare the journal entry to recognize the depletion at the end of the year. If an amount box does not require an entry, leave it blank.