Question

On June 5, 2019, Mabel Company purchased an oil well for $850,000. The well contains an estimated $85,000 barrels of oil, with an estimated residual value of zero. During July, 2019, $25,500 barrels of oil were removed from the well. All of the oil went into inventory. What amount of Depletion Expense is recorded in July, 2019? (Round your final answer to the nearest dollar.)
A) $0.
B) $850,000.
C) $85,000.
D) $255,000.

Answer 1

Answer:

amount of Depletion = $255,000

so correct option is D) $255,000

Explanation:

given data

purchased oil well = $850,000

barrels of oil = $85,000

barrels of oil were removed = $25,500

to find out

amount of Depletion

solution

we apply here formula for amount of Depletion that is

amount of Depletion = purchased oil well × $\frac{oil removed}{barrels of oil}$       ............................1

put here value we get

amount of Depletion = $850,000 × $\frac{25,500 }{85000l}$    

amount of Depletion = $255,000

so correct option is D) $255,000