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Present the general adjusting journal entries

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Reference no: EM132951767

On April 1. 2021, Bahlahah Oil Co. purchased, for $10,280,000, oil drilling rights to land in an area where oil has been discovered.

  • Experts predict there will be a total of 400,000 barrels of oil available.
  • Oil rig equipment was also purchased on this date for $740,000. The equipment will be abandoned when the well runs dry.

Problem 1: Assume that the oil well produced 113,200 barrels of oil during 2021. Present the general adjusting journal entries required for December 31, 2021 as follows:

(a) the depletion of the rights to the natural resource, and
(b) the depreciation of the oil rig equipment (units-of-production approach)

Reference no: EM132951767

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