Units-of-Production Method with Natural Resources
Response to the following problem:
The company purchased an oil field for $4,200,000 cash. The oil field contains an estimated 600,000 barrels of oil. During the first year of operation, the company extracts and sells 70,000 barrels of oil. Compute the amount of depletion expense, and make the necessary journal entry(ies) to record depletion expense for the year.