Gem Limited commences operations on 1 January 2019. During 2019 Gem Limited explores threeareas and incurs the following costs:Exploration and Evaluation expenditure ($)Desirable25,000,000Undesirable20,000,000Neutral28,000,000In 2020 oil is discovered at Desirable Site. Undesirable Site is abandoned. Neutral Site has not yet reacha stage that permits a reasonable assessment at the existence or otherwise of economicallyrecoverable reserves, and active and significant operations in the area of interest are continuing. Inrelation to the exploration and evaluation expenditures incurred at Desirable Site and Neutral Site, 70percent of the expenditures related to property, plant and equipment, and the balance relates tointangible assets.In 2020, development costs of $48,000,000 are incurred at Desirable Site (to be written off on aproduction basis). $32,000,000 of this expenditure relates to property, plant and equipment, and thebalance relates to intangible assets. The development of Desirable Site is completed but theproduction is not started yet. (i.e. there is no production, inventory and sales)Required:Provide the necessary journal entries using the area-of-interest method |

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Answered: Gem Limited commences operations on 1…

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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Depletion On January 2, 2019, Whistler Company purchased land for $530,000, from which it is estimated that 360,000 tons of ore could be extracted. It estimates that the present value of the cost necessary to restore the land is $68,000, after which it could be sold for $31,000. During 2019, Whistler mined 73,000 tons and sold 62,000 tons. During 2020, Whistler mined 93,000 tons and sold 89,000 tons. At the beginning of 2021, Whistler spent an additional $110,000, which increased the reserves by 60,000 tons. In 2021, Whistler mined 132,000 tons and sold 137,000 tons. Whistler uses a FIFO cost flow assumption. Required: If required, round the depletion rate to the nearest cent and round the final answers to the nearest dollar. 1. Calculate the depletion included in the income statement and ending inventory for 2019, 2020, and 2021. 2019 Depletion deducted from income $ Depletion included in inventory $4 2020 Depletion deducted from income $ Depletion included in inventory $4 2021…
Minero, Inc. embarked a new venture in Salaginto Corporation in 2022. It expects to gleam 2,000,000 ounces of a precious ore from its holdings there, over several years. Relevant data follow: Cost of the mineral rights, P 500,000 Exploration cost, 2022 (1/3 successful), P 1,500,000 Extraction cost, 2022, P 2,000,000 Ore extracted, 2022 (500,000 oz.) Ore sold, 2022 (300,000 oz.) What is depletion for 2022, using the successful efforts method of accounting for exploration costs? A. 350,000 B. 250,000 C.150,000 D. 300,000
The company also recently has bought an intangible assets for $60000 with as estimated useful life of 60000 units. No residual value is anticipated. Around 15000 units were produced by the end of the year 2019. Identify amount of amortization of such assets for the year 2019. a. $15000 b. $60000 c. $45000 d. $30000
Week 8Gem Limited commences operations on 1 January 2019. During 2019 Gem Limited explores threeareas and incurs the following costs:Exploration and Evaluation expenditure ($)Desirable 25,000,000Undesirable 20,000,000Neutral 28,000,000In 2020 oil is discovered at Desirable Site. Undesirable Site is abandoned. Neutral Site has not yet reacha stage that permits a reasonable assessment at the existence or otherwise of economicallyrecoverable reserves, and active and significant operations in the area of interest are continuing. Inrelation to the exploration and evaluation expenditures incurred at Desirable Site and Neutral Site, 70percent of the expenditures related to property, plant and equipment, and the balance relates tointangible assets.In 2020, development costs of $48,000,000 are incurred at Desirable Site (to be written off on aproduction basis). $32,000,000 of this expenditure relates to property, plant and equipment, and thebalance relates to intangible assets. The development…
During 2018, Libby Oil and Gas Company completed the last well from its drilling and production platform off the coast of Texas. Unrecovered costs not including decommissioning costs on December 31, 2018, were $25 million, including $5 million in acquisition costs and $20 million in drilling and development costs. Total proved developed reserves were estimated to be 600,000 barrels as of the January 1, 2018. Production during 2018 was 30,000 barrels. At the end of the life of the reservoir, decommissioning costs are estimated to be $14 million, and salvage value is estimated to be $1 million. Required: compute DD&A for 2018.
Gem Limited commences operations on 1 January 2019. During 2019 Gem Limited explores three areas and incurs the following costs:Exploration and Evaluation expenditure ($)Desirable 25,000,000Undesirable 20,000,000Neutral 28,000,000In 2020 oil is discovered at Desirable Site. Undesirable Site is abandoned. Neutral Site has not yet reached a stage that permits a reasonable assessment at the existence or otherwise of economically recoverable reserves, and active and significant operations in the area of interest are continuing. In relation to the exploration and evaluation expenditures incurred at Desirable Site and Neutral Site, 70 percent of the expenditures related to property, plant, and equipment, and the balance relates to intangible assets.In 2020, development costs of $48,000,000 are incurred at Desirable Site (to be written off on a production basis). $32,000,000 of this expenditure relates to property, plant, and equipment, and the balance relates to intangible assets. The…
Depletion On January 2, 2019, Whistler Company purchased land for $430,000, from which it is estimated that 350,000 tons of ore could be extracted. It estimates that the present value of the cost necessary to restore the land is $74,000, after which it could be sold for $28,000. During 2019, Whistler mined 79,000 tons and sold 63,000 tons. During 2020, Whistler mined 97,000 tons and sold 95,000 tons. At the beginning of 2021, Whistler spent an additional $90,000, which increased the reserves by 53,000 tons. In 2021, Whistler mined 144,000 tons and sold 134,000 tons. Whistler uses a FIFO cost flow assumption. Required: If required, round the depletion rate to the nearest cent and round the final answers to the nearest dollar. 1. Calculate the depletion included in the income statement and ending inventory for 2019, 2020, and 2021. 2019 Depletion deducted from income Depletion included in inventory $ 2020 Depletion deducted from income Depletion included in inventory $ 2021 Depletion…

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