Reference no: EM132891503

Problem - On January 1, 2021, Devour & Engulf Co. paid $1,657,500 for the mineral rights to an oil shale deposit containing an estimated 390,000 barrels of oil. The company also installed equipment on the site at a cost of $1,150,500 with no expected salvage value, capable of removing the oil shale in six years. The equipment will be abandoned when the oil shale is completed depleted. The company chooses to use a "Units of Production" approach to depreciate its PPE assets at the site while the mineral rights use a "Straight-Line" approach. The company has rights to extract oil for 8 years but plans to extract all the oil in 6 years. Devour & Engulf began operations on June 1, and extracted and sold 35,000 barrels of oil during the remaining seven months of the year.

Give the entries to record the December 31, 2021 amortization of the oil shale mineral rights and depreciation of the equipment.