Example: You purchase an oil well for $10,000. You expect to extract 10,000 barrels of oil from this well. Each quarter you extract 2,000 barrels of oil. In Year 1, Quarter 4 you discover that you entered the wrong capacity. You increase the production capacity to 50,000 barrels.
| Account Description | Debit | Credit |
|---|---|---|
| Depreciation Expense | 400.00 | |
| Accumulated Depreciation | 4,400.00 | |
| Depreciation Expense (adjustment) | 4,800.00 |
| Account Description | Debit | Credit |
|---|---|---|
| Depreciation Expense | 181.82 | |
| Accumulated Depreciation | 181.82 |