On January 1,2019,Plenty of Oil,Inc.purchased an oil field that is estimated to have 15,000,000 barrels of oil for $45,000,000.In 2019,1,300,000 barrels of oil were extracted and sold.In 2020,2,100,000 barrels of oil were extracted and sold.The oil field will have no residual value.What is the book value of the oil reserves that will be reported on the balance sheet as of December 31,2020?

Question

Quizplus · Accepted Answer

$45,000,000 ÷ 15,000,000 = $3 per barrel
Accumulated Depletion = $3 × (1,300,000 + 2,100,000)= $10,200,000
Oil Reserves = $45,000,000 - $10,200,000 = $34,800,000