Bargain Oil, a small Texas oil company, holds huge reserves of oil. Assume that at theend of

Question:

Bargain Oil, a small Texas oil company, holds huge reserves of oil. Assume that at theend of 2012, Bargain Oil’s cost of oil reserves totaled approximately $13.6 million, representing 1.7 million barrels of oil reserves in the ground.

Requirements
1. Calculate Bargain Oil’s depletion expense per barrel of oil.
2. Suppose Bargain Oil removed 300,000 barrels of oil during 2013 and sold all of these barrels during the year. Record Bargain Oil’s depletion expense for 2013.