An oil well that costs $1,000,000 is estimated to contain 10,000 barrels of oil. Pioneer extracted...
An oil well that costs $1,000,000 is estimated to contain 10,000 barrels of oil. Pioneer extracted 2,000 barrels of oil. Depletion is $20,000. True False
Homework Answers
Answer: False
Cost per barrel = total cost/no of barrels
= $1,000,000/10,000 = $100 per barrel
2,000 barrels have been extracted. Therefore, depletion = cost per barrel * no of barrels extracted = $100*2,000 = $200,000 and not $20,000. Hence the statement is false.
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