An oil field is purchased for $6,000,000. No salvage value is expected. The estimated recoverable amount of oil is 250,000 barrels. During the year just ended, 27,000 barrels of oil were extracted and sold.

Required:

1.  Compute the depletion rate. Show your computations.

2.  Prepare the journal entry to recognize the depletion at the end of the year. If an amount box does not require an entry, leave it blank.