Answer:
$5,525,000
Explanation:
For computation of depletion during year 8 first we need to find out depletion base and depletion charge per unit which is shown below:-
Depletion base = Acquisition Cost + Exploration Cost + Restoration Cost + Development Cost
= $45,000,000 + $500,000 + $1,300,000 + $200,000
= $47,000,000
and
Depletion Charge per unit of barrel
= (Depletion Base - Salvage Value) ÷ Units to be recovered
= ($47,000,000 - $4,500,000) ÷ 1,000,000
= $42,500,000 ÷ 1,000,000
= $42.5
now,
Depletion during year 8 = Depletion charge per barrel × Number of barrels extracted
= $42.5 × 130,000
= $5,525,000
Therefore for computing the depletion during year 8 we simply multiply the depletion charge per barrel with number of barrels extracted.
