On March 1, 20A, Jance Company purchased a producing oil well at a cash cost of $100,000. It is estimated that 250,000 barrels of oil can be produced over the remaining life of the well. By December 31, 20A (end of the accounting period), 1,500 barrels of oil were produced and sold. What would be the amount of depletion expense for 20A on this well?
A) $300
B) $600
C) $450
D) $750

Question

Quizplus · Accepted Answer

The depletion expense is calculated by dividing the cost of the well by the total estimated barrels and then multiplying by the barrels produced. ($100,000 / 250,000 barrels) * 1,500 barrels = $600.

On March 1, 20A, Jance Company Purchased a Producing Oil