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)…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

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Chapter11: Long-term Assets

Section: Chapter Questions

Problem 6PB: Underwoods Miners recently purchased the rights to a diamond mine. It is estimated that there are...

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Assume the following data for the following wells commingled production tanks on the Wilmington Ranch located in LaVaca County, Texas. Measured production is 2,228 barrels from Lease C and 2,280 barrels from Lease D. After treatment at the central tank battery, 4,500 barrels are sold. Lease C Wells 24-Hr Test (bbl) Days Produced Well 1 30 28 Well 2 40 30 Lease D Wells 24-Hr Test (bbl) Days Produced Well 1 20 30 Well 2 35 30 Well 3 50 26 Current Spot Oil Price Severance Tax Rate Working Interest $46.00/bbl 5% 100% 1/8th Royalty interest Prepare entries recognizing revenue at time of sale if the OPERATOR assumes the responsibility of distributing severance taxes and royalty. What amount of gross revenue, royalty, severance taxes and net revenue should the Operator record for each well (Lease C- Well 1 & Well 2 and Lease D - Well 1, Well 2, & Well 3)?
In this assignment you will need to perform an analysis on a hypothetical discovery based on the following information: Field Size 1.4 Tcf Production/Reserve Ratio 7% of the original field size starting producing year 3 Gas Price $3.5/Mcf CapEx $1/Mcf capitalized in 5 years, straight-line depreciation Operating Cost $0.8/Mcf Royalty 10% Government Take 40% Cost recovery limit 60% of gross revenue Discount Rate 10% Income Tax Rate 33% Allow cost recovery carry forward 1. Evaluate the discovery – you need to calculate the total worth, worth to the company, government take, value in terms of entitlement interest and working interest. 2. Evaluate the producing gas reserve – total worth, worth to the company, government take, value in terms of entitlement interest and working interest.
7. Chavez Petroleum's lease in Wyoming produces both oil and gas. Additional information as of 1/1/19 follows: IDC..... Proved property costs, net L&WE. Beginning of year accumulated DD&A Estimated proved reserves, 12/31/19 $900,000 100,000 300,000 50,000 Oil ...... 200,000 bbl Gas Production during 2019 Oil 1,000,000 Mcf .... Gas. 10,000 bbl 300,000 Mcf REQUIRED: Compute amortization assuming the lease is fully developed: a. Assuming oil is the dominant mineral
Texas Oil Company (TOC) paid $3,000,000 for an oil reserve estimated to hold 50,000 barrels ofoil. Oil production is expected to be 10,000 barrels in year 1, 30,000 barrels in year 2, and 10,000barrels in year 3. TOC expects to begin selling barrels from its oil inventory in year 4.Required:Assuming these estimates prove to be accurate, show the balances in the oil reserve, accumulateddepletion, and oil inventory accounts in each of the three years. What effect does this yearly depletion have on the income statement?
Evaluate the discovery – you need to calculate the total worth, worth to the company, government take, value in terms of entitlement interest and working interest. Field Size 1.4 Tcf Production/Reserve Ratio 7% of the original field size starting producing year 3 Gas Price $3.5/Mcf CapEx $1/Mcf capitalized in 5 years, straight-line depreciation Operating Cost $0.8/Mcf Royalty 10% Government Take 40% Cost recovery limit 60% of gross revenue Discount Rate 10% Income Tax Rate 33%
On an audit engagement for 20X0, you handled the audit of fixed assets of ABC Copper Mines. This mining company bought the exploration rights of XYZ Exploration on June 30, 20X0 for P7,290,000. Of this purchase price, P4,860,000 was allocated to copper ore which had remaining reserves estimated at 1,620,000 tons. ABC Copper Mines expects to extract 15,000 tons of ore a month with an estimated selling price of P50 per ton. Production started immediately after some new machines costing P600,000 were bought on June 30, 20X0. These new machineries had an estimated useful life of 15 years with a scrap value of 10% of the cost after the ore estimated has been extracted from the property, at which time the machinery will already be useless. Among the operating expenses of ABC Copper Mines on December 31, 20X0 were: Depletion expense - 405,000 and depreciation of machinery - 40,000. Round depreciation rate to 2 decimal places. The adjusted depreciation at year-end amounted to?
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?
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
Required information. [The following information applies to the questions displayed below.) Last Chance Mine (LCM) purchased a coal deposit for $2,305,050. It estimated it would extract 18,150 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1.18 million, $4.5 million, and $3.3 million for years 1 through 3, respectively. During years 1-3, LCM reported net income (loss) from the coal deposit activity in the amount of ($11,500), $737,500, and $647,500, respectively. In years 1-3, LCM extracted 19,150 tons of coal as follows: (1) Tons of Coal (2) Banis $2,305,050 Depletion (2)/(1) Rate $127.00 Tons Extracted per Year Year 1 2,300 Year 2 11,350 Year 3 5,500 18.150 Note: Leave no answer blank. Enter zero if applicable. Enter your answers in dollars and not in millions of dollars. c. Using the cost and percentage depletion computations from parts (a) and (b), what is LCM's actual depletion expense for each year? Answer is complete but not entirely…
Required information [The following information applies to the questions displayed below.] Last Chance Mine (LCM) purchased a coal deposit for $2,088,450. It estimated it would extract 17,550 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1.15 million, $4.35 million, and $3.1 million for years 1 through 3, respectively. During years 1-3, LCM reported net income (loss) from the coal deposit activity in the amount of ($15,400), $667,500, and $662,500, respectively. In years 1-3, LCM extracted 18,550 tons of coal as follows: (Leave no answer blank. Enter zero if applicable. Enter your answers in dollars and not in millions of dollars.) (1) Tons of Coal 17,550 (2) Basis $2,088,450 Depletion (2)/(1) Rate $119.00 Year 1 2,400 Tons Extracted per Year Year 2 11,450 Year 3 4,700 c. Using the cost and percentage depletion computations from parts (a) and (b), what is LCM's actual depletion expense for each year? Depletion Expense Year 1 Year 2 $…
Required information [The following information applies to the questions displayed below.] Last Chance Mine (LCM) purchased a coal deposit for $1,667,600. It estimated it would extract 18,950 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1.32 million, $5 million, and $4.1 million for years 1 through 3, respectively. During years 1-3, LCM reported net income (loss) from the coal deposit activity in the amount of ($17,500), $702,500, and $695,000, respectively. In years 1-3, LCM extracted 19,950 tons of coal as follows: (1) Tons of Coal 18,950 Depletion (2) Basis (2)+(1) Rate $1,667,600 $88.00 Year 3 Year 1 4,800 6,000 Note: Leave no answer blank. Enter zero if applicable. Enter your answers in dollars and not in millions of dollars. Tons Extracted per Year Year 2 9,150 b. What is LCM's percentage depletion for each year (the applicable percentage for coal is 10 percent)? Year 1 Year 2 Year 3 Percentage Depletion
Problem 28-11 (AICPA Adapted) On July 1, Lethargic Company, a calendar year entity, purchased the rights to a mine. The total purchase price was P14,000,000, of which P2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased new equipment on July 1. The equipment was purchased for P8,000,000 and had a useful life of 4 years with no residual value. 1. What is the depletion for the current year? а. 1,200,000 b. 2,400,000 c. 1,950,000 d. 1,400,000 2. What is the depreciation of the equipment for the current year? a. 1,600,000 b. 2,000,000 c. 1,000,000 d. 1,200,000 CS Scanned with CamScanner

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