E9-17 (Algo) (Supplement 9A) Calculating and Reporting Depletion [LO 9-S1] Salamander Company (SC) paid $4,320,000 for an oil reserve estimated to hold 80,000 barrels of oil. Oil production is expected to be 18,000 barrels in year 1, 44,000 barrels in year 2, and 18,000 barrels in year 3. Salamander Company expects to begin selling barrels from its oil inventory in year 4. Required: 1. Assuming these estimates prove to be accurate, show the balances in the oil reserve, accumulated depletion, and oil inventory accounts in each of the three years. 2. What effect does this yearly depletion have on the income statement? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming these estimates prove to be accurate, show the balances in the oil reserve, accumulated depletion, and oil inventory accounts in each of the three years. Oil Reserve Accumulated Depletion Oil Reserve, Net Oil Inventory Year 1 Year 2 Required 1 Year 3 Required 2

E9-17 (Algo) (Supplement 9A) Calculating and Reporting Depletion [LO 9-S1] Salamander Company (SC) paid $4,320,000 for an oil reserve estimated to hold 80,000 barrels of oil. Oil production is expected to be 18,000 barrels in year 1, 44,000 barrels in year 2, and 18,000 barrels in year 3. Salamander Company expects to begin selling barrels from its oil inventory in year 4. Required: 1. Assuming these estimates prove to be accurate, show the balances in the oil reserve, accumulated depletion, and oil inventory accounts in each of the three years. 2. What effect does this yearly depletion have on the income statement? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming these estimates prove to be accurate, show the balances in the oil reserve, accumulated depletion, and oil inventory accounts in each of the three years. Oil Reserve Accumulated Depletion Oil Reserve, Net Oil Inventory Year 1 Year 2 Required 1 Year 3 Required 2

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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Nylon have assigned $1.5 million dollars to purchase the asset(s). Nylon's WACC is 8%. Years Asset L Asset M Asset N Initial Costs $700,000 $800,000 $500,000 Expected Cash Inflows: 2018 300,000 200,000 2019 250,000 200,000 200,000 2020 200,000 200,000 200,000 2021 150,000 200,000 150,000 2022 200,000 150,000 Requirement: Recommend which Asset(s) the company should purchase based on the Payback and Net Present Value Capital Budgeting Techniques. If the funds allow for the purchase of more than one asset, rank them from most favourable to least and select the ones to be purchased.
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of equipment have an initial investment of $728,831. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Net Cash Flow Year Diamond Core Drill Hydraulic Excavator 1 $233,000 $291,000 23 4569 207,000 270,000 207,000 249,000 165,000 256,000 126,000 7 8 105,000 91,000 91,000 The estimated residual value of the diamond core drill at the end of Year 4 is $290,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 -0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 7 45 65 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 12%. Use the present value table appearing above. Diamond Core Drill Hydraulic…
Q3// The municipality directorate purchased the mechanisms for an amount of (120) million Iraqi dinars, and the period of their use was estimated at (10) years. If the recoverable value was (60) million dinars, find And by using the method of the fixed ratio 1 - extinction in the sixth year. 2- The accumulated depreciation at the end of the sixth year 3- The book value at the end of the sixth year 4- The book value at the end of the useful life (the period of use).
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7. Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $3114 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the Journal entry for year one.
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