Final answer:
To journalize the depletion expense for Asian Petroleum for 2024, multiply the number of barrels sold (16,000,000) by the depletion expense per barrel ($0.70) to get $11,200,000, and make a journal entry with a debit to Depletion Expense and a credit to Accumulated Depletion for that amount.
Step-by-step explanation:
The student has asked how to journalize the depletion expense for 2024 for Asian Petroleum, given that the company's oil reserves at the end of 2023 totaled $168,000,000 for 240,000,000 barrels of oil, and that during 2024, 16,000,000 barrels were removed and sold.
To calculate the depletion expense per barrel, we divide the total cost of the oil reserves by the total number of barrels.
This results in $168,000,000 / 240,000,000 barrels = $0.70 per barrel. The depletion expense for the 16,000,000 barrels sold in 2024 would be 16,000,000 barrels x $0.70 per barrel = $11,200,000.
The journal entry would be a debit to Depletion Expense for $11,200,000 and a credit to Accumulated Depletion for $11,200,000.
Journal Entry:
Explanation: Recorded depletion expense for 16,000,000 barrels of oil sold during 2024.
The complete question is:Asian Petroleum holds huge reserves of oil. Assume that at the end of 2023 , Asian Petroleum's cost of oil reserves totaled $168,000,000, representing 240,000,000 barrels of oil. Suppose Asian Petroleum removed and sold 16,000,000 barrels of oil during 2024. Journalize depletion expense for 2024 . (Assume no residual value. Record debits first, then credits. Select the explanation on the last line of the journal entry table.)