1. 19. Placid Oil Corporation purchased an offshore lease costing $3,000,000 with 5,000total acres. Proved reserves are found on a 1,000-acre tract that is included in the5,000 acres. Management decides to reclassify only the proved area acreage.REQUIRED: Prepare the entry to reclassify the acreage.

workings : Proved property = proved reserves/ Total Acres x offshore Lease…

Placid Oil Corporation purchased an offshore lease c total acres. Proved reserves are found on a 1,000-acr 5,000 acres. Management decides to reclassify onlyt REQUIRED: Prepare the entry to reclassify the acre

Placid Oil Corporation purchased an offshore lease c total acres. Proved reserves are found on a 1,000-acr 5,000 acres. Management decides to reclassify onlyt REQUIRED: Prepare the entry to reclassify the acre

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 5C

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

19. Placid Oil Corporation purchased an offshore lease costing $3,000,000 with 5,000
total acres. Proved reserves are found on a 1,000-acre tract that is included in the
5,000 acres. Management decides to reclassify only the proved area acreage.
REQUIRED: Prepare the entry to reclassify the acreage.

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