On April 1, Year 1, Fossil Energy Company Purchased an Oil

question 22

Multiple Choice

On April 1, Year 1, Fossil Energy Company purchased an oil producing well at a cash cost of $12,000,000. It is estimated that the oil well contains 600,000 barrels of oil, of which only 500,000 can be profitably extracted. By December 31, Year 1, 25,000 barrels of oil were produced and sold. The amount of depletion expense for Year 1 on this well would be:

• A) $800,000.
• B) $600,000.
• C) $480,000.
• D) $500,000.

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