McCabe Oil Company has an account titled Oil and gas properties. McCabe paid $6,

ID: 2349365 • Letter: M

Question

McCabe Oil Company has an account titled Oil and gas properties. McCabe paid $6,200,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $510,000 for additional geological tests of the property and $490,000 to prepare for drilling. During the first year, McCabe removed 90,000 barrels of oil, which it sold on account for $39 per barrel. Operating expenses totaled $850,000, all paid in cash. Requirements 1. Record all of McCabe McCabe Oil Company has an account titled Oil and gas properties. McCabe paid $6,200,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $510,000 for additional geological tests of the property and $490,000 to prepare for drilling. During the first year, McCabe removed 90,000 barrels of oil, which it sold on account for $39 per barrel. Operating expenses totaled $850,000, all paid in cash. Requirements 1. Record all of McCabe

Explanation / Answer

Journal

Date

Accounts & Explanation

Debit

Credit

Purchased Oil reserves (500,000 barrels)

$6,200,000

Geological tests

$510,000

Drill Site Preparation

$490,000

Sold 90,000 barrels of oil ($39 per barrel)

$351,0000

Operating Expenses

$850,000

Deductions

$7,699,000