4. Devo Oil Company acquired property rights to search for natural...
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4. Devo Oil Company acquired property rights to search for natural resources on land that it is convinced has oll reserves, for $15,400,000. The contract requires that Devo restore the property to a status usable for a park after drilling and extraction are complete. The estimated cost of this restoration is $2,350,000. Devo incurs exploration costs of $1,320,000 and intangible development costs of $1,535,000. Geological surveys suggest that approximately 1,100,000 barrels of oil can be extracted from the site. In 2025, Devo extracts 235,000 barrels of oil. Instructions (1) What is the depletion base for this location for Devo Oil? (2) What is the depletion cost per unit (barrel) to be used by Devo for this site (round to the nearest cent)? (3) What journal entry is required to record the extraction of the oil for the first year? 4) If 150,000 barrels of oil are sold within the initial year, what is the cost of goods sold for the oil and the remaining inventory balance
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