Question

holds huge reserves of oil. Assume that at the end of 2017​, South Shore Petroleum​'s cost of oil reserves totaled $ 252 comma 000 comma 000​, representing 180 comma 000 comma 000 barrels of oil. Suppose South Shore Petroleum removed and sold 12 comma 000 comma 000 barrels of oil during 2018. Journalize depletion expense for 2018.

Answer 1

Depletion expense is $16,800,000

Step-by-step explanation:

2018 depletion expense=total oil reserves cost*quantity removed/total reserves

total oil reserves cost is $252,000,000

quantity removed in 2018 12,000,000 barrels

total oil reserves is 180,000,000 barrels

2018 depletion expense =$252,000,0000*12,000,0000/180,000,000

=$16,800,000

The depletion expense to charge against revenue in 2018 in order to arrive at net income is $16,800,000