(L.OBJ. 4) Natural resource accounting [15—20 min]
Donahue Oil Company has an account titled Oil and Gas Properties. Donahue paid $6,400,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $590,000 for additional geological tests of the property and $400,000 to prepare for drilling. During the first year, Donahue removed 70,000 barrels of oil, which it sold on account for $31 per barrel. Operating expenses totaled $840,000, all paid in cash.
Requirement
1. Record all of Donahue’s transactions, including depletion for the First year.
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