Chapter 9, Problem 9.39BP

To determine

Depletion: It refers to the process of proportionately distributing the cost of the extracting natural resources such as coal, mines, and petroleum from the earth to the number of units extracted. The following is the formula to calculate the depletion expense:

$\text{Depletion Cost per Unit }=\frac{\text{Cost of the asset }-\text{ Residual value}}{\text{Estimated Number of Units}}$

$\text{Depletion Expense}=\left(\begin{array}{l}\text{Depletion Cost per Unit }\\ \times \text{ Number of units Extracted and Sold}\end{array}\right)$

To record: the journal entry for the purchase of oil reserves.

To determine

To record: the journal entry for the additional cost related to oil and gas properties.