>Unit-of-production methodThis method amortizes the costs of oil and gas industry activities andis dependent on the accounting method chosen by the owner of theassets. The following general formula shows the concept of unit-of-production amortization:[unamortized costs at end of period]+|production for period[Amortization for period]=!reserves at the beginning of period Economic evaluation>Example [Reference 1] Unit-of-production amortizationAssuming total capitalized costs at the end of the period are equal to$1 500 000, accumulated amortization taken in prior periods is equalto $500 000, estimated remaining recoverable reserves at the end ofthe period are equal to 440 000 BOE, and production during the periodis equal to 60 000 BOE, calculate the amortization for the period usingthe unit-of-production method.

Under Unit of production method, amortization cost is based on the production capacity of the asset…

>Example [Reference 1] Unit-of-production amortization Assuming total capitalized costs at the end of the period are equal to $1 500 000, accumulated amortization taken in prior periods is equal to $500 000, estimated remaining recoverable reserves at the end of the period are equal to 440 000 BOE, and production during the period is equal to 60 000 BOE, calculate the amortization for the period using the unit-of-production method.

>Example [Reference 1] Unit-of-production amortization Assuming total capitalized costs at the end of the period are equal to $1 500 000, accumulated amortization taken in prior periods is equal to $500 000, estimated remaining recoverable reserves at the end of the period are equal to 440 000 BOE, and production during the period is equal to 60 000 BOE, calculate the amortization for the period using the unit-of-production method.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: For the cash flows shown, the correct equation for FW2 using the ROIC method at the reinvestment…

A: The reinvestment rate is the rate at which the cash flows arising in a project are reinvested into…

Q: am. 146.

A: To determine the project's discounted payback period, we need to discount each of the cash flows at…

Q: What is the net present worth of the cash flow series below at an interest rate of 9% End of Period…

A: YEAR CASH FLOW DISCOUNT RATE 0 -100.00 1 -150.00 2 -200.00 3 -250.00 4 -300.00 5…

Q: Payback Period and Accounting Rate of Return: Equal Annual Operating Cash Flows with Disinvestment…

A: Payback Period The term "payback time" refers to the amount of years needed to recoup the initial…

Q: Submit Answer DETAILS The following investment requires table factors for periods beyond the table.…

A: Time value of money is one of useful concept used in finance. It says that amount invested today…

Q: U A. B. OC. 1. The alternatives shown are to be compared on the basis of their present worth values.…

A: Equivalent annual savings is the cost of operating and maintaining an asset annually. It is also…

Q: Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow…

A: Capital budgeting in finance provides tools that help evaluate the profitability of long-term…

Q: EXERCISE 1: PROFIT FOR THE YEAR AND CASH FLOW With the following information, calculate the…

A: Given Information : Operating profit = $200,000 Capital cost allowance = $50,000 Other expenses =…

Q: Bruin, Incorporated, has identified the following two mutually exclusive projects: Year 67234 Cash…

A: As per the guidelines, the solution for the first three sub parts will be provided. If you want the…

Q: What is the present value of the following cash flow stream at a rate of 10.0%? Years: 0 1 2 3…

A: The present value of cash flows is calculated by discounting each future cash flow using an…

Q: What is the equation for the bolded item?

A: The PVIFA calculation formula is as follows: PVIFA=1-(1+r)-nr =1-(1+10.20%)-910.20% PVIFA=present…

Q: etermine the capitalized cost of $100,000 now and $50,000 per year in years 1 through infinity at…

A: Capitalized cost refers to the present worth of cash flows which go on for an infinite period of…

Q: 2. Compare the following alternatives, using (i) the Net Present Value method . The MARR is 13.32%…

A: Net present value shows how much of the present value of cash inflows exceeds over those of present…

Q: Calculate the change in Working Capital given the following: 2021…

A: Estimates of working capital are determined from a balance sheet's variety of assets and…

Q: ANO Ltd. is providing the following information: Annual cost of saving Useful life Salvage value…

A: When a project has a zero net present value (NPV), the projected cash inflows precisely balance the…

Q: Required: An asset that you hold has a value at the start of the year of 200. After six months it…

A: The return refers to the gain and the profit on the investment. The investment on the asset is the…

Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

100%

>Unit-of-production method
This method amortizes the costs of oil and gas industry activities and
is dependent on the accounting method chosen by the owner of the
assets. The following general formula shows the concept of unit-of-
production amortization:
[unamortized costs at end of period]+|production for period
[Amortization for period]=!
reserves at the beginning of period

Economic evaluation
>Example [Reference 1] Unit-of-production amortization
Assuming total capitalized costs at the end of the period are equal to
$1 500 000, accumulated amortization taken in prior periods is equal
to $500 000, estimated remaining recoverable reserves at the end of
the period are equal to 440 000 BOE, and production during the period
is equal to 60 000 BOE, calculate the amortization for the period using
the unit-of-production method.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

What is the termination cash flow (everything except the operational cash flow) at the end of year 5?
Cash Flow Asset End of year Amount Appropirate Requried Retrun A 1 $5,000 18% 2 $5,000 3 $5,000 Using cell references to the given datea and the PV function, calculate the value of asset A.
What's the forecasted capital expenditure based on the information below? -Net PP&E beginning of period = 4200-Net PP&E end of period = 6800-Depreciation expenses = 900 a. 5900b. 1700c. 3500d. 2600
Subject: acounting
A 60.
Cash Flow Asset End of year Amount Appropriate Required Return D 1 through 5 $1,500 12% 6 $8,500 By using cell references to the given datea and the function PV, Calculate the value of asset D.
The duration of the assets to four decimal places:Cash: 0.0000 yearsLoans: 1.7500 yearsTreasuries: 7.0000 years The duration of the liabilities to four decimal places:Time Deposits: 1.7500 yearsCDs: 2.5000 yearsEquity: Not provided If all interest rates decline 90 basis points (ΔR/(1 + R) = -90 basis points), the change in the market value of equity can be calculated as follows:
Clementine County's assets have a market value of $5,000,000 and a duration of 11 at the current market interest rate of 2.5%. Use the duration formula to estimate the value of the assets if the market interest rate changes from 2.5% to 2.2%. O 5.161 million O 5.247 million O 5.032 million 4.917 million
Compute the NPV of the project below assuming that the cost of capital is 8%: Year 0 1 2 3 FCF -85,000 55,000 55,000 68,000
ASAP
Consider an asset with upfront cost of $32,639. The cost associated with it during the first year of operation is $3,415. The cost associated with it during the second year of operation is $12,099. With an interest rate of 0.08, what is a levelized cost payment payable at the end of years 1 and 2, which has the same present value as the actual cost stream at the end of period 0. The annuity formula for an interest rate of 0.08 and t payments is given by 0+ 2)-(¹-0)
For each of the investments below, calculate the rate of return earned over the period. Investment ABCDE Cash Flow During Beginning-of-Period End-of-Period Value Period Value - $400 13,000 4,000 60 1,700 $1,700 140,000 60,000 800 14,500 $800 117,000 46,000 400 12,600