Cost Adjustments to Assets Depreciating Under a Units of Production Method
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 3, you realize that you entered the wrong asset cost. You adjust the recoverable cost to $15,000.
| Asset Clearing
| 5,000.00
|
|
| Accounts Payable Liability
|
| 5,000.00
|
| Asset Cost
| 5,000.00
|
|
| Asset Clearing
|
| 5,000.00
|
Expensed
| Depreciation Expense
| 3,000.00
|
|
| Depreciation Expense (adjustment)
| 2,000.00
|
|
| Accumulated Depreciation
|
| 5,0000.00
|
Amortized
| Depreciation Expense
| 3,666.67
|
|
| Accumulated Depreciation
|
| 3,666.67
|
