(Learning Objective 5: Account for the depletion of a company’s naturalresources) Jackson Petroleum, a giant oil company, holds reserves of oil and gas assets. Atthe end of 2018, assume the cost of Jackson’s oil reserves totaled $180 billion, representing10 billion barrels of oil in the ground.1. Which depreciation method is similar to the depletion method that Jackson and other oilcompanies use to compute their annual depletion expense for the oil removed from theground?2. Suppose the company removed 1,000 million barrels of oil during 2019. Record this event.Show amounts in billions.3. Assume that, of the amount removed in (2), the company sold 800 million barrels. Makethe cost of sales entry
(Learning Objective 5: Account for the depletion of a company’s natural
resources) Jackson Petroleum, a giant oil company, holds reserves of oil and gas assets. At
the end of 2018, assume the cost of Jackson’s oil reserves totaled $180 billion, representing
10 billion barrels of oil in the ground.
1. Which
companies use to compute their annual depletion expense for the oil removed from the
ground?
2. Suppose the company removed 1,000 million barrels of oil during 2019. Record this event.
Show amounts in billions.
3. Assume that, of the amount removed in (2), the company sold 800 million barrels. Make
the cost of sales entry
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