Question
Chapman Oil Company has an account titled Oil and Gas Properties. Chapman paid $ 6,300,000 for oil reserves holding an estimated 400,000 barrels of oil.
Chapman Oil Company has an account titled Oil and Gas Properties. Chapman paid $ 6,300,000 for oil reserves holding an estimated 400,000 barrels of oil. Assume the company paid $ 560,000 for additional geological tests of the property and $ 440,000 to prepare for drilling. During the first year, Chapman removed and sold 65,000 barrels of oil. Record all of Chapman 's transactions, including depletion for the first year.(Record debits first, then credits)
Chapman paid $6,300,000 for oil reserves holding an estimated 400,000 barrels of oil.
Record the payment for the oil reserves. Do not record payment for any additional costs associated with the oil reserves (geological testing and/or drilling). We will do this in the following entry.
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Assume the company paid $ 560,000 for additional geological tests of the property and $ 440,000to prepare for drilling.
Record the payment for additional geological tests of the property and for preparing the property for drilling. (Record a single compound journal entry.)
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During the first year, Chapman removed and sold 65,000 barrels of oil.
Record the depletion expense for the first year. (Assume no residual value. Round interim calculations to the nearest cent and your final answers to the nearest whole dollar.)
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