Echo Oil Company purchased an oil well on January 1, 2021 at a cost of $10,000,000 cash. At the end of its life, the oil well property could be sold for $700,000. It was estimated that 1,000,000 litres of oil would be extracted over the well's 20 year life.

REQUIRED Write the journal entries for the first year, including a) the purchase of the property,

b) the depletion rate and necessary depletion entry, and

c) the entries to record oil sold during the year. Assume that 100,000 litres of oil were extracted and of this amount, 30,000 litres were sold for cash of $400,000.