P10-33A Accounting for natural resources Dep. Exp. $1,296,000

McCabe Oil Company has an account titled Oil and Gas Properties. McCabe

paid $6,200,000 for oil reserves holding an estimated 500,000 b00 barrels of oil.

Assume the company paid $510,000 for additional geological tests of the property and $490,000 to prepare for drilling. During the first year

, McCabe removed and sold 90,000 barrels of oil. Record all of McCabe's transactions, including depletion for the first year.

depletion for the first year

Purchase price of oil reserves Add related costs: Geological tests Drilling preparation Total cost of oil reserves Depletion per unit = = = (Cost - Residual value) / Estimated total units Depletion expense = = = Depletion per unit Number of units extracted Accounts for journal entries Oil and Gas Properties Cash Oil and Gas Properties Cash Depletion ExpenseOil and Gas Properties Accumulated DepletionOil and Gas Properties s extracted as Properties Record journal entries here Accounts and Explanation Debit Credit