Accounting for depletion of natural resources [5-10 min]
TexAm Petroleum holds huge reserves of oil and gas assets. Assume that at the end of 2012, TexAm Petroleum’s cost of oil and gas reserves totaled $72,000,000,000, representing 8,000,000,000 barrels of oil and gas.
Requirements
1. Which depreciation method does TexAm Petroleum use to compute depletion?
2. Suppose TexAm Petroleum removed 400,000,000 barrels of oil during 2013. Journalize depletion expense for 2013.
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