Crane Oil Company acquired property rights to search for natural resources on land that it is convinced has oil reserves, for$15,415,170. The contract requires that Crane restore the property to a status usable for a park after drilling and extraction arecomplete. The estimated cost of this restoration is $2,360,000. Crane incurs exploration costs of $1,317,000 and intangibledevelopment costs of $1,531,000. Geological surveys suggest that approximately 1,119,000 barrels of oil can be extracted from thesite. In 2025, Crane extracts 238,000 barrels of oil.

Property Acquisition Cost: $15,415,170Restoration Cost: $2,360,000 (considered part of the property…

Answered: Crane Oil Company acquired property…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 11EB: The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining...

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The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.
Devo Oil Company acquired property rights to search for natural resources on land that it is convinced has oil reserves, for $15,400,000. The contract requires that Devo restore the property to a status usable for a park after drilling and extraction are complete. The estimated cost of this restoration is $2,350,000. Devo incurs exploration costs of $1,320,000 and intangible development costs of $1,535,000. Geological surveys suggest that approximately 1,100,000 barrels of oil can be extracted from the site. In 2025, Devo extracts 235,000 barrels of oil. Instructions (4) If 150,000 barrels of oil are sold within the initial year, what is the cost of goods sold for the oil and the remaining inventory balance?
Us Oil Company acquired property rights to search for natural resources on land that it is convinced has oil reserves, for $15,418,620. The contract requires that Oriole restore the property to a status usable for a park after drilling and extraction are complete. The estimated cost of this restoration is $2,363,000. Oriole incurs exploration costs of $1,335,000 and intangible development costs of $1,770,000. Geological surveys suggest that approximately 1,113,000 barrels of oil can be extracted from the site. In 2025, Oriole extracts 248,000 barrels of oil. What journal entry is required to record the extraction of the oil for the first year?
Sparkle Company acquired a tract of land containing an extractable mineral resource. Sparkle is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the mineral resource. Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,200,000 after restoration. Relevant cost information follows: Land $9,000,000 Estimated restoration costs 1,800,000 If Sparkle maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material? $Answer?
Josephine Company acquired a tract of land containing an extractable natural resource. The entity is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological survey indicated that the recoverable reserves would be 2,000,000 tons and that the extraction will be completed in five years. Relevant cost of information follows: Land 9,000,000 Exploration and development costs 1,000,000 Expected cash flow for restoration costs 1,500,000 Credit- adjusted risk-free interest rate 10% PV of 1 at 10% for 5 periods 0.62 What is the depletion charge per ton of extracted material?
Clean Company acquired a tract of land containing an extractable natural resource. Clean is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,000,000 after restoration. Relevant cost information follows: Land $7,500,000 Estimated restoration costs 1,500,000 If Clean maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material? Oa. $4.00 Ob. $3.20 Oc. $2.60 d. $3.00
4. Devo Oil Company acquired property rights to search for natural resources on land that it is convinced has oil reserves, for $15,400,000. The contract requires that Devo restore the property to a status usable for a park after drilling and extraction are complete. The estimated cost of this restoration is $2,350,000. Devo incurs exploration costs of $1,320,000 and intangible development costs of $1,535,000. Geological surveys suggest that approximately 1,100,000 barrels of oil can be extracted from the site. In 2025, Devo extracts 235,000 barrels of oil. Instructions (1) What is the depletion base for this location for Devo Oil? (2) What is the depletion cost per unit (barrel) to used by Devo for this site (round to the nearest cent)? (3) What journal entry is required to record the extraction of the oil for the first year? (4) If 150,000 barrels of oil are sold within the initial year, what is the cost of goods sold for the oil and the remaining inventory balance?
PUP CAF Mining Company purchased a tract of land containing mineral resources for P54,000,000. The purchase contract contained a provision that PUP CAF is required to restore the land suitable for factory use after it has extracted the mineral resource. Geological survey has indicated that 2,400,000 tons of ore could be extracted. The property has an estimated salvage value of P6,000,000 after the ore has been extracted and the land is restored. The estimated cost of restoration and geological survey is P7,200,000 which is the present value at the date of acquisition. Assuming that PUP CAF does not maintain inventories of extracted ores, how much should be charged to depletion expense per ton of extracted mineral ore?
Cooler Company acquired a tract of land containing an extractable natural resource. Cooler is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons and that the land will have of P1,000,000 after restoration. Relevant cost information as follows: Land P 9,000,000 Estimated restoration costs 1,500,000 If Cooler maintains no inventories of extracted material, what should be the depletion expense per ton of extracted material?
Vai
A Company acquired a tract of land containing an extractable natural resource. The entity is required by the contract to restore the land to a condition suitable for recreational use after it had extracted the natural resource. Geological survey indicated that the recoverable reserves will be 1,000,000 tons and that the extraction will be completed in 10 years. Acquisition cost 9,000,000 Exploration and development costs 1,000,000 Expected cash flow for restoration cost 1,500,000 Credit-adjusted risk free interest rate 12% Using a PV of 4 decimal points, determine: (1)Total depletable cost, beginning of year (2)Depletion expense for the current year (3)Carrying amount of wasting asset, end of year
Novak Corporation acquires a coal mine at a cost of $ 831,000. Intangible development costs total $ 216,000. After extraction has occurred, Novak must restore the property (estimated fair value of the obligation is $ 91,000), after which it can be sold for $ 118,000. Novak estimates that 8,500 tons of coal can be extracted. If 600 tons are extracted the first year, prepare the journal entry to record depletion. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

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