Ephrayim Oil and Gas Company abandoned a proved property late in 2020.Costs relating to the property are as follows:Proved propertyWells and EquipmentExploratory dry holesPaid-up Ordinary Shares2,150,0001,750,000480,00018,500,000Journalized the transaction:

Journaling is the process of recording business transactions in accounting records. This activity…

Answered: 2,150,000 1,750,000

Business

Accounting

2,150,000 1,750,000

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter5: Business Deductions

Section: Chapter Questions

Problem 35P

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Ephrayim Oil and Gas Company abandoned a proved property late in 2020.
Costs relating to the property are as follows:
Proved property
Wells and Equipment
Exploratory dry holes
Paid-up Ordinary Shares
2,150,000
1,750,000
480,000
18,500,000
Journalized the transaction:

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