Clampett Corporation paid cash to acquire land to be used for oil production. The costs incurred by Clampett were the following: Estimates were made that 10,500,000 gallons of crude oil can be extracted from the site over the life of the asset.
Required:
a) Prepare the journal entry(ies) to record the purchase of the oil field.
b) Given that Clampett was able to extract
230,000 gallons in the first year,
975,000 gallons in the second year, and
854,000 gallons in the third year
Calculate the depletion charge for each year

Question

Clampett Corporation paid cash to acquire land to be used for oil production. The costs incurred by Clampett were the following:  Estimates were made that 10,500,000 gallons of crude oil can be extracted from the site over the life of the asset.
Required:
a) Prepare the journal entry(ies) to record the purchase of the oil field.
b) Given that Clampett was able to extract
230,000 gallons in the first year,
975,000 gallons in the second year, and
854,000 gallons in the third year
Calculate the depletion charge for each year

Quizplus · Accepted Answer

The Answer of Clampett Corporation paid cash to acquire land to be used for oil production. The costs incurred by Clampett were the following:  Estimates were made that 10,500,000 gallons of crude oil can be extracted from the site over the life of the asset.
Required:
a) Prepare the journal entry(ies) to record the purchase of the oil field.
b) Given that Clampett was able to extract
230,000 gallons in the first year,
975,000 gallons in the second year, and
854,000 gallons in the third year
Calculate the depletion charge for each year

Clampett Corporation Paid Cash to Acquire Land to Be Used