Donahue Oil has an account titled Oil and Gas Properties. Donahue paid $6,700,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $560,000 for additional geological tests of the property and $460,000 to prepare for drilling. During the first year, Donahue removed and sold 60,000 barrels of oil. Record all of Donahue's transactions, Including depletion for the first year. (Record debits first, then credits. Explanations will appear on the last line of the joumal entry table.) Donahue paid $6,700,000 for oil reserves holding an estimated 500,000 barrels of oil. Record the payment for the oil reserves. Do not record payment for any additional costs associated with the oil reserves (geological testing and/or drilling). We will do this in the following entry. Date Accounts and Explanation Debit Credit Assume the company paid $560,000 for additional geological tests of the property and $460,000 to prepare for drilling. Record the payment for additional geological tests of the property and for preparing the property for drilling. (Record a single compound journal entry.) Date Accounts and Explanation Debit Credit During the first year, Donahue removed and sold 60,000 barrels of oil. Record the depletion expense for the first year. (Assume no residual value. Round interim calculations to the nearest cent and your final answers to the nearest whole dollar.) Date Accounts and Explanation Debit Credit
Donahue Oil has an account titled Oil and Gas Properties. Donahue paid $6,700,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $560,000 for additional geological tests of the property and $460,000 to prepare for drilling. During the first year, Donahue removed and sold 60,000 barrels of oil. Record all of Donahue's transactions, Including depletion for the first year. (Record debits first, then credits. Explanations will appear on the last line of the joumal entry table.) Donahue paid $6,700,000 for oil reserves holding an estimated 500,000 barrels of oil. Record the payment for the oil reserves. Do not record payment for any additional costs associated with the oil reserves (geological testing and/or drilling). We will do this in the following entry. Date Accounts and Explanation Debit Credit Assume the company paid $560,000 for additional geological tests of the property and $460,000 to prepare for drilling. Record the payment for additional geological tests of the property and for preparing the property for drilling. (Record a single compound journal entry.) Date Accounts and Explanation Debit Credit During the first year, Donahue removed and sold 60,000 barrels of oil. Record the depletion expense for the first year. (Assume no residual value. Round interim calculations to the nearest cent and your final answers to the nearest whole dollar.) Date Accounts and Explanation Debit Credit
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 5PB: Johnson, Incorporated, had the following transactions during the year: Purchased a building for...
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Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Donahue Oil has an account titled Oil and Gas Properties. Donahue paid $6,700,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $560,000 for additional geological tests
of the property and $460,000 to prepare for drilling. During the first year, Donahue removed and sold 60,000 barrels of oil. Record all of Donahue's transactions, including depletion for the first year. (Record debits
first, then credits. Explanations will appear on the last line of the joumal entry table.)
Donahue paid $6,700,000 for oil reserves holding an estimated 500,000 barrels of oil.
Record the payment for the oil reserves. Do not record payment for any additional costs associated with the oil reserves (geological testing and/or drilling). We will do this in the following entry.
Date
Accounts and Explanation
Debit
Credit
Assume the company paid $560,000 for additional geological tests of the property and $460,000 to prepare for drilling.
Record the payment for additional geological tests of the property and for preparing the property for drilling. (Record a single compound journal entry.)
Date
Accounts and Explanation
Debit
Credit
During the first year, Donahue removed and sold 60,000 barrels of oil.
Record the depletion expense for the first year. (Assume no residual value. Round interim calculations to the nearest cent and your final answers to the nearest whole dollar.)
Date
Accounts and Explanation
Debit
Credit
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