An oil well cost $2,050,000 and is calculated to hold 290,000 barrels of oil. There is no residual value. Which journal entry is needed to record the expense for the extraction of 53,000 barrels of oil during the year? All 53,000 barrels were sold during the year. (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

Debit: Depletion Expense $374,710

Credit: Accumulated Depletion $374,710

To record Depletion Expense.

Explanation:

Let us first calculate the per barrel cost:

Total Cost / Total barrels of oil

$2,050,000 / 290,000

$7.07

Now let us find the cost of 53,000 barrels which is sold during the period as:

$7.07 x 53,000 barrels

$374,710

It means that $374,710 of capitalized costs to extract oil is depleted.

Hence we can create the Journal entry as follows:

Debit: Depletion Expense $374,710

Credit: Accumulated Depletion $374,710

To record Depletion Expense.