McCabe Oil Company has an account titled Oil and gas properties. McCabe paid $6,200,000 for oil reserves

McCabe Oil Company has an account titled Oil and gas properties. McCabe paid $6,200,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $510,000 for additional geological tests of the property and $490,000 to prepare for drilling. During the first year, McCabe removed 90,000 barrels of oil, which it sold on account for $39 per barrel. Operating expenses totaled $850,000, all paid in cash.

Required:

1. Record all of McCabe’s transactions, including depletion for the first year. 

2. Prepare Income Statement for Oil and Gas project