Answer:
Depletion expenses Dr $1,500,000
To Accumulated depletion $1,500,000
(This entry records the depletion expense)
Explanation:
The journal entry is as follows:
Depletion expenses Dr $1,500,000
To Accumulated depletion $1,500,000
(This entry records the depletion expense)
To account for this, we debited the depletion expense since it increases the expense and credited the accumulated depletion which reduces the assets
The calculation displayed below:
The acquisition cost is
= Aquired value ÷ estimated production
= $18,550,000 ÷ 74,200,000
= $0.25 per gallons
Thus, the depletion allowance is
= current year production × purchase price
= 6,000,000 × $0.25
= $1,500,000
