Answer:
Depletion expenses Dr $1,500,000
To Accumlated depletion $1,500,000
(Being the depletion expense is recorded)
Explanation:
The journal entry is shown below:
Depletion expenses Dr $1,500,000
To Accumlated depletion $1,500,000
(Being the depletion expense is recorded)
For recording this we debited the depletion expense as it increased the expense and credited the accumulated depletion as it reduced the assets
The computation is shown below:
The purchase price is
= Aquired value ÷ estimated production
= $18,550,000 ÷ 74,200,000
= $0.25 per gallons
Now depletion allowance is
= current year production × purchase price
= 6,000,000 × $0.25
= $1,500,000
