Big Oil Company acquired an interest in a lease by paying a lease bonus of $80,000. Big drilled a productive well and deducted the IDC. An engineering report on January 1 estimated the reserves at 30,000 barrels of oil. During the year, 1,000 barrels of oil were produced and sold for $70,000. Big Oil expenses for the production of the oil were $32,000. What is Big Oil's allowable depletion?

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To calculate Big Oils allowable depletion we first need to determine the depletion rat... View the full answer