Friday 16 November 2012

George Company purchased oil rights on July 1, 2013 for $2,600,000. If 200,000 barrels of oil are expected to be extracted over the assets life, and 40,000 barrels are extracted and sold in 2013, the recognition of depletion expense on December 31, 2013 would cause (Do not round intermediate calculations.): • a reduction in equity of $200,000. • a reduction in assets of $400,000. • a reduction in assets of $520,000. • an increase in equity of $560,000.

George Company purchased oil rights on July 1, 2013 for $2,600,000. If 200,000 barrels of oil are expected to be extracted over the assets life, and 40,000 barrels are extracted and sold in 2013, the recognition of depletion expense on December 31, 2013 would cause (Do not round intermediate calculations.):

·       a reduction in equity of $200,000.

·       a reduction in assets of $400,000.

·       a reduction in assets of $520,000.

·       an increase in equity of $560,000.



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