Exxon Mobil holds huge reserves of oil Assume that at the en

Exxon Mobil holds huge reserves of oil. Assume that at the end of 2017, Exxon Mobil\'s cost of oil reserves totaled $126,000,000, representing 140,000,000 barrels of oil. Suppose Exxon Mobil removed 15,000,000 barrels of oil during 2018. Journalize the depletion expense for 2018.

Solution

Depreciation expense a/c. Dr 13,500,000

To oil reserve (asset). 13,500,000

(Being depreciation charged for oil reserve.

126,000,000*15,000,000/140,000,000 = 13,500,000