Question

An oil well cost $2,030,000 and is calculated to hold 350,000 barrels of oil. There is no residual value. Which journal entry is needed to record the expense for the extraction of 47,000 barrels of oil during the year? All 47,000 barrels were sold during the year. (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.) 272,600 272,600 272,600 272,600 O A. Depletion Expense - Oil Reserve Oil Revenue O B. Cost of Goods Sold - Oil Reserve Accumulated Depletion - Oil Reserve O C. Depletion Expense - Oil Reserve Accumulated Depletion - Oil Reserve OD. Oil Reserve Inventory Accumulated Depletion - Oil Reserve 272,600 272,600 272,600 272,600

Answer 1

1) Journal entry

Date	account and explanation	Debit	Credit
	Depletion expense (2030000/350000*47000)	272600
	Accumulated depletion-Oil reserve		272600

So answer is c)

2) Interest expense = 58000*8%*5/12 = 1933

So answer is b) $1933

3) Journal entry

Date	account and explanation	Debit	Credit
	Account receivable (535000*1.1)	588500
	Sales revenue		535000
	Sales tax payable		53500

So answer is b) a debit to account receivable $588500

4) Accumulated depreciation = 570000-10000/7*3 = 240000

2020 Depreciation expense = (570000-240000-10000)/6 = 53333

So answer is d) $53333

5) Depreciation expense = (37000-8000/5) = 5800

Book value = 37000-5800 = 31200

Gain (loss) = 23000-31200 = -8200

So answer is b) $8200 loss