On June 5, 2010, Patriot Oil purchased an oil reserve capable of producing 2,500,000 barrels of oil for $30,000,000. In 2010, Patriot recovered 100,000 barrels of oil from the reserve. Also in 2010, Patriot sold 92,000 barrels of oil at $31 per barrel. Customers paid cash for the oil.
Required:
1. Compute the per-barrel depletion rate.
2. Prepare the journal entry to record the recovery of the barrels of oil.
3. Prepare the journal entry to record the sale of the barrels of oil. Patriot uses a perpetual system.

Question

On June 5, 2010, Patriot Oil purchased an oil reserve capable of producing 2,500,000 barrels of oil for $30,000,000. In 2010, Patriot recovered 100,000 barrels of oil from the reserve. Also in 2010, Patriot sold 92,000 barrels of oil at $31 per barrel. Customers paid cash for the oil.
Required:
1.	Compute the per-barrel depletion rate.
2.	Prepare the journal entry to record the recovery of the barrels of oil.
3.	Prepare the journal entry to record the sale of the barrels of oil. Patriot uses a perpetual system.

Quizplus · Accepted Answer

The Answer of On June 5, 2010, Patriot Oil purchased an oil reserve capable of producing 2,500,000 barrels of oil for $30,000,000. In 2010, Patriot recovered 100,000 barrels of oil from the reserve. Also in 2010, Patriot sold 92,000 barrels of oil at $31 per barrel. Customers paid cash for the oil.
Required:
1.	Compute the per-barrel depletion rate.
2.	Prepare the journal entry to record the recovery of the barrels of oil.
3.	Prepare the journal entry to record the sale of the barrels of oil. Patriot uses a perpetual system.

On June 5, 2010, Patriot Oil Purchased an Oil Reserve