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andrey2020 [161]
3 years ago
6

Clark Oil and Gas incurred costs of $15.3 million for the rights to extract resources from a natural gas deposit. The company ex

pects to extract 8 million cubic feet of natural gas during a six-year period. Natural gas extracted during years 1 and 2 were 800,000 and 1,600,000 cubic feet, respectively. What was total depletion for year 1 and year 2, assuming the company uses the units-of-production method
Business
1 answer:
miss Akunina [59]3 years ago
7 0

Answer and Explanation:

The computation is shown below

Depletion expense per cubic feet  would be

= Total cost ÷ Total cubic feet

= $15.3 million ÷ 8 million

= $1.9125 per cubic feet

Now

Depletion for year 1

= Number of cubic feet extracted × Depletion per cubic feet

= 800,000 × $1.9125

= $1,530,000

And, for the depletion for year 2

= 1,600,000 × $1.9125

= $3,060,000

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