A saltwater disposal system is added to Lease A's gathering system at a cost of $225,000.Assume the following acquisition costs and monthly operating expense fro the motn of May2018 is $30,000.Case A: The disposal system serves several wells on two different leases.There are 7 wells on lease A and 10 wells on Lease B.Case B: the disposal system serves only the wells on Lease A.Required: Record the acquisition cost and the monthly expenses.

Introduction: Acquisition costs include the true cost of fixed assets before sales tax, as well as…

Answered: A saltwater disposal system is added to…

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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50) Crestfield leases office space. On January 3, the company incurs $15,000 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Crestfield has 5 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements? A) Debit Amortization Expense-Leasehold Improvements $1,500; credit Accumulated Amortization Leasehold Improvements $1,500. B) Debit Depletion Expense $3,000; credit Accumulated Depletion $3,000. C) Debit Depreciation Expense $1,500; credit Accumulated Depreciation $1,500. D) Debit Depletion Expense $15,000; credit Accumulated Depletion $15,000. E) Debit Amortization Expense-Leasehold Improvements $3,000; credit Accumulated Amortization Leasehold Improvements $3,000.
Fundo entered into a 20-year operating lease for a property on 1 October 2000 which has a remaining life of eight years at 1 October 2012. The rental payments are $2.3 million per annum. Prior to 1 October 2012, Fundo obtained permission from the owner of the property to make some internal alterations to the property so that it can be used for a new manufacturing process which Fundo is undertaking. The cost of these alterations was $7 million and they were completed on 1 October 2012 (the time taken to complete the alterations can be taken as being negligible). A condition of being granted permission was that Fundo would have to restore the property to its original condition before handing back the property at the end of the lease. The estimated restoration cost on 1 October 2012, discounted at 8% per annum to its present value, is $5 million. Required: (a) Explain how the lease, the alterations to the leased property and the restoration costs should be treated in the financial…
Grande Machinery Company purchased, for cash, a $60,000 custom machine on January 1, 2015. The machine has an estimated 5-year life and will be straight-line depreciated with no salvage value. The machine was then leased to Sunshine Engineering Company, an 80%-owned subsidiary, under a 5-year operating lease for $15,000 per year, payable each January.1. Record the 2015 entries for the purchase of the machine and the lease to Sunshine Engineering Company on the books of GrandeMachinery Company.2. Record the 2015 entries for the transaction on the books of Sunshine Engineering Company.3. Provide the elimination entries that would be made on the 2015 consolidated worksheet.

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