In 2014,Barnes Enterprises purchased an oil well for $12,000,000.It is estimated that 80,000,000 barrels can be extracted from the well.Depletion expense during 2015,when 2,000,000 barrels were extracted and sold,totaled

Question

Quizplus · Accepted Answer

Depletion expense is calculated as cost of the well divided by estimated recoverable units.

Depletion expense per barrel = Cost of well / Estimated recoverable units 
Depletion expense per barrel = $12,000,000 / 80,000,000 barrels 
Depletion expense per barrel = $0.15

Depletion expense for 2,000,000 barrels = $0.15 x 2,000,000 
Depletion expense for 2,000,000 barrels = $300,000

Therefore, the correct option is B.

In 2014,Barnes Enterprises Purchased an Oil Well for $12,000,000