Depletion Expense. During the year, Tulsa Oil Corporation paid $50 million for a partial interest in a Canadian oil field with proven reserves. The company’s share of the future production was capped at ten million barrels. Required 1. Assuming that the oil field attains its expected future output, calculate Tulsa’s depletion charge per barrel. 2. If in the following year, Tulsa’s share of the field’s total production amounts to 2.25 million barrels, what is the firm’s depletion expense for that following year?
Depletion Expense. During the year, Tulsa Oil Corporation paid $50 million for a partial interest in a Canadian oil field with proven reserves. The company’s share of the future production was capped at ten million barrels. Required 1. Assuming that the oil field attains its expected future output, calculate Tulsa’s depletion charge per barrel. 2. If in the following year, Tulsa’s share of the field’s total production amounts to 2.25 million barrels, what is the firm’s depletion expense for that following year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depletion Expense. During the year, Tulsa Oil Corporation paid $50 million for a partial interest in a Canadian oil field with proven reserves. The company’s share of the future production was capped at ten million barrels.
Required
1. Assuming that the oil field attains its expected future output, calculate Tulsa’s depletion charge per barrel.
2. If in the following year, Tulsa’s share of the field’s total production amounts to 2.25 million barrels, what is the firm’s depletion expense for that following year?
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