Exon Oil acquired the rights to various oil reserves at $ 20,000,000 in March 1, 2007. The estimated barrels of oil are 5,000,000 barrels.
(a) Determine the estimated depletion cost per barrel of oil.
(b) If 800,000 barrels are extracted the first year, what is the depletion cost for the first year?
(c) Illustrate or explain the effects on the accounts and financial statements for the Depletion expense.