Prepare the journal entries to record the depletion for 2022

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Question: On January 1, 2022, Oiltacular Inc. installed an oil well at a purchase price of $12,336,500 with an installation cost of $499,000 all for cash. The residual value of the oil well is $618,000. Oiltacular estimates that the total predicted output is 181,000 barrels of oil. The company only pumped out 3,200 barrels in 2022 and 4,500 barrels in 2023.

a) Prepare the journal entry to record the purchase of the oil well with the installation.

b) Prepare the journal entries to record the depletion for 2022 and 2023. Assume all oil pumped for 2022 was sold and none of the oil pumped in 2023 was sold.

Reference no: EM133661675

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