On April 1,Year 1,Fossil Energy Company purchased an oil producing well at a cash cost of $12,000,000.It is estimated that the oil well contains 600,000 barrels of oil,of which only 500,000 can be profitably extracted.By December 31,Year 1,25,000 barrels of oil were produced and sold.What is depletion expense for Year 1 on this well?
A)$800,000
B)$600,000
C)$480,000
D)$500,000

Question

Quizplus · Accepted Answer

Unit depletion charge = Cost of $12,000,000 ÷ Estimate of 500,000 barrels = $24 per barrel
Depletion expense = Barrels extracted during year of 25,000 × $24 per barrel = $600,000

On April 1,Year 1,Fossil Energy Company Purchased an Oil Producing