On March 1, 2016, Anniston Company Purchased an Oil Well

Multiple Choice

On March 1, 2016, Anniston Company purchased an oil well at a cost of $1,000,000. It is estimated that 150,000 barrels of oil can be produced over the remaining life of the well and the residual value of the well will be $100,000. During 2016, 15,000 barrels of oil were produced and 10,000 barrels were sold. Which of the following statements is correct with respect to the accounting for the oil well?

A) The 2016 cost of goods sold was $90,000.
B) The book value of the oil well decreased $60,000 during 2016.
C) The inventory of oil was $30,000 at December 31, 2016.
D) The 2016 cost of goods sold was $30,000.