Homework Answers
| a) | DEPRECIATION = | COST OF OIL LEASE * PRODUCTION OF 1ST YEAR / TOTAL EXPECTED PRODUCTION | |
| 500000 * 3200 / 31250 | |||
| 51200 | |||
| b) | JOURNAL ENTRY | ||
| 31-Dec | BY DEPRECIATION ………….51200 (DEBIT) | ||
| TO OIL LEASE ……………………51200 (CREDIT) | |||
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Deveton Class pack problem-depletion of an oil and gas well Reggio Company purchased an oil lease...
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Cheney Oil, Inc. has an account titled Oil and Gas Properties. Cheney paid $6,900,000 for oil reserves holding an estimated 600,000 barrels of oil. Assume the company paid $560,000 for additional geological tests of the property and $460,000 to prepare for drilling. During the first year, Cheney removed and sold 62.000 barrels of oil. Record all of Cheney's transactions, including depletion for the first year (Record debits first, then credits Select the explanation on the last line of the journal...
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