Question

fitzgerald oil and gas incurred costs of $5.72 million for the acquisition and development of a natural gas deposit. the company expects to extract 2.20 million cubic feet of natural gas during a four-year period. natural gas extracted during years 1 and 2 were 880,000 and 980,000 cubic feet, respectively. What was the depletion for year 1 and year 2?

Answer 1

Year 1: $2.53 million ($5.72 million / 2.20 million x 880,000)  

Year 2: $2.85 million ($5.72 million / 2.20 million x 980,000)

Natural gas is a combustible hydrocarbon gas, consisting primarily of methane but also containing small amounts of other gases, such as ethane, propane, and butane. Natural gas is formed deep beneath the earth’s surface when organic matter, such as plant and animal remains, is exposed to extreme heat and pressure over millions of years. Natural gas is found in underground reservoirs, often in association with oil, and is extracted by drilling.

It is transported to users via a network of pipelines and is used for many purposes, including electric power generation, heating, and cooking. It is an important fuel for the industrial sector and is also becoming increasingly important for powering vehicles. Natural gas is a clean-burning fuel with a very low carbon footprint, making it a valuable resource in the fight against climate change.

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