Zabrinski Company purchased oil rights on July 1,2012 for $3,200,000.If 200,000 barrels of oil are expected to be extracted over the asset's life and 30,000 barrels are extracted and sold in 2012,the amount of depletion expense recorded on December 31,2012 would be:

Question

Quizplus · Accepted Answer

The depletion expense is calculated by dividing the cost of the oil rights by the total expected barrels and then multiplying by the barrels extracted and sold. ($3,200,000 / 200,000 barrels) * 30,000 barrels = $480,000.

Zabrinski Company Purchased Oil Rights on July 1,2012 for $3,200,000