WellLiberty Well 124-Hr Test (bbl)Days Produced2030Freedom Well A-13526Dyson Powell5024Total Production Sold2,900 measured at pointof deliveryAssume the data above for the following wells commingled production in Tank Battery on the Premise Lease located inFayette County, Texas. Cameron Oil Company (70% WI) and Garcia Company (30% WI) own a joint working interest inthe Dowling Field. The expected selling price was $60/bbl. The royalty interest is 1/5 and the severance tax rate is 10%.What amount of gross revenue, royalty, severance taxes, and net revenue should Cameron Oil Company recordfor each well (Liberty Well 1, Freedom Well A-1, and Dyson Powell)?Focus

Step 1: Calculate the total revenue from the oil sold. Given that the total production sold is 2,900…

Answered: Well Liberty Well 1 24-Hr Test (bbl)…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Merco, Inc .. a machinery builder in Louisville. Kentucky. is considering making an investment of $ 1.250,000 in a complete structura l-bcam-fllbri cation system. The increased productivity resulting from the in stallation of the drilling system is central to the project's justification. Merco estimates the following figures as a basis for calculating productivity:• Increased fabri ca ted-s teel production: 2,000 LOns/year• Average sales price per ton of fabricated steel: $2,566.50• Labor rate:$ I 0.50/hour• Tons of steel produced in a year: LS.000• Cost of steel per ton (2 .205 lb):$ 1.950• Number of workers on layout. hole making. sawing, and material handling: 17• Additional maintenance cost: $128.500/yearWith the cost of steel at $ 1.950 per ton and the direct-labor cost of fabrica ting l lb at 10 cents. the cost of producing a ton of fabricated steel is about $2. 170.50. With a selling price of $2.566.50 per ton. the resulling contribution to overhead and profit becomes $396 per…
An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $14,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the sixth year of life by each of these methods: a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS.
On 1 October 20X3 Xplorer commenced drilling for oil from an undersea oilfield. The extraction of oil causes damage to the seabed which has a restorative cost (ignore discounting) of $10,000 per million barrels of oil extracted. Xplorer extracted 250 million barrels in the year ended 30 September 20X4. Xplorer is also required to dismantle the drilling equipment at the end of its five year licence. This has an estimated cost of $30 million on 30 September 20X8. Xplorer's cost of capital is 8% per annum and $1 has a present value of 68 cents in five years' time. What is the total provision (extraction plus dismantling) which Xplorer would report in its statement of financial position as at 30 September 20X4 in respect of its oil operations?
1.During the month of August, a mining company has a gross income of P4,200,000 from the production of nickel. All expenses, excluding depletion expenses for this month, amount to P2,800,000. If the fixed depletion rate for nickel is 22%, what is the depletion allowance for this month? 2.To develop on oil well containing 5,000,000 barrels of oil required an initial investment of P40,000,000. In a certain year, 500,000 barrels of oil were produced from this well. Determine the depletion charge during the year. 3. a certain machine costs p40,000 and has a life of 4 years and salvage value of p5000. the production output of this machine in units per year for the first year; 1,800 units,2nd year 2,200 units; 3rd year; 3,000 units, 4th year 4,000 units. the units produced are of uniform quality. what is the annual depreciation charge?
MNH firm revealed a large coal mine expected to mine 254 tons of coal. The firm invests $10264 for mining the coal. They are effective in extracting 50 tons of the coal in the first year. Then the depletion cost is: O 5051.18 O 4040.94 O 2020.47 O 3030.71 O 1010.24
On December 31 Y1, the Company ARL develop a Product: Master 3D. The disbursement associate to the Product are the following: Research $6,000,000 and Development $4,000,000. The criteria have been met for recognition of the development costs as an asset. Product Master D will be in the market in Year 2 and is expected to marketable for 5 years. Total sales of the product are estimated at $100,000,000. Instructions: Using IAS 38, determine the effect of the Research & Development costs have on Company’s Net Income. Answer the following questions. 1. Choose one and explain Net Income using IFRS will be in Year 1: a. Higher by $________ larger than U.S. GAAP income. b. Lower by $________ larger than U.S. GAAP income. c. Both will be the same. 2. Explanation: 3. Year 3 (ending balance) Determine the Book Value of the asset 4. Explanation:
On December 31 Y1, the Company ARL develop a Product: Master 3D. The disbursement associate to the Product are the following: Research $6,000,000 and Development $4,000,000. The criteria have been met for recognition of the development costs as an asset. Product Master D will be in the market in Year 2 and is expected to marketable for 5 years. Total sales of the product are estimated at $100,000,000. Instructions: Using IAS 38, determine the effect of the Research & Development costs have on Company’s Net Income. Answer the following questions. 1. Choose one and explain Net Income using IFRS will be in Year 1: a. Higher by $________ larger than U.S. GAAP income. b. Lower by $________ larger than U.S. GAAP income. c. Both will be the same. 2. Explanation: 3. Year 3 (ending balance) Determine the Book Value of the asset 4. Explanation: Show you computations.
At year-end XYZ Company has an in-process construction project with costs totaling $10,000,000. It has billed $8,000,000 on these projects and collected $6,500,000. As it employs the percentage-of-completion method it has also recognized a total of $1,000,000 in profit to date on these contracts. The XYZ balance sheet would report: Selected Answer: Incorrect Asset values totaling $1,500,000 for these projects. Answers: Correct Asset values totaling $4,500,000 for these projects. Asset values totaling $3,500,000 for these projects. Asset values totaling $1,500,000 for these projects. Liabilities values totaling $1,000,000 for these projects.
Merco, Inc .. a machinery builder in Louisville. Kentucky. is considering making an investment of $ 1.250,000 in a complete structural-bcam-lubrication system.The increased productivity resulting from the installation of the drilling systemis central to the project's justification. Merco estimates the following figures as a basis for calculating productivity:• Increased fabricated-s teel production: 2,000 LOns/year• Average sales price per ton of fabricated steel: $2,566.50• Labor rate:$ I 0.50/hour• Tons of steel produced in a year: LS.000• Cost of steel per ton (2 .205 lb):$ 1.950• Number of workers on the layout. hole making. sawing, and material handling: 17• Additional maintenance cost: $128.500/yearWith the cost of steel at S 1.950 per ton and the direct-labor cost of fabricating l lb at 10 cents. the cost of producing a ton of fabricated steel is about $2. 170.50. With a selling price of $2.566.50 per ton. the resulting contribution to overhead and profit becomes $396 per ton.…
A refinery buys 15 million barrels of crude oil at a market price of $40 per barrel on11th August 20X1. Having processed the oil, the refinery sells its final products in October 20X1 for an average price of $50 per barrel, when the average market price of crude oil is $44 per barrel. Which of the following statements about current replacement cost accounting is/are correct: (i) Replacement cost profit of $150 million is made on the sale. (ii) The capital maintenance adjustment is $90 million. (iii) Cost of sales is $600 million. a. (i) and (iii) b. (i) and (ii) c. (ii) and (iii) d. (i) only e. No statement is correct f. (ii) only g. (iii) only
Full Cost versus Successful Efforts Method. During the current year, The Calgary Oil & Gas Company began an exploration project in Montana. The company had paid $1,500,000 for the drilling rights on a tract of 500 acres of land. The company then spent another $180,000 building roads and containment ponds. The project called for eight exploratory wells to be drilled at an expected cost of $130,000 per well. The first eight wells drilled were found to be “dry” (lacking commercially viable quantities of oil or gas); however, both the ninth and tenth wells drilled contained commercially viable quantities of oil condensate. Consequently, two additional development wells were drilled at a cost of $140,000 per well. Calculate the capitalized cost of Calgary’s oil reserves under (a) the full cost method and (b) the successful efforts method
Full Cost versus Successful Efforts Method. During the current year, The Calgary Oil & Gas Company began an exploration project in Montana. The company had paid $1,500,000 for the drilling rights on a tract of 500 acres of land. The company then spent another $180,000 building roads and containment ponds. The project called for eight exploratory wells to be drilled at an expected cost of $130,000 per well. The ﬁrst eight wells drilled were found to be "dry" (lacking commercially viable quantities of oil or gas); however, both the ninth and tenth wells drilled contained commercially viable quantities of oil condensate. Consequently, two additional development wells were drilled at a cost of $140,000 per well. For income tax reporting purposes, should the company use the full cost method or the successful efforts method? which method should the company use when reporting its financial results to its shareholders? why?

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