Penn Resources, a successful efforts company, has three proved fields, 1,2, and 3. Costs and cash flows for the three fields are as follows: Field 1Field 2Field 3 Net capitalized costs 5,500,0008,000,0009,000,000 Expected undiscounted future cash flows 4,700,0009,000,0008,500,000 Expected discounted future cash flows 3,900,0008,000,0007,600,000 For each field, (1) determine if impairment is required, and (2) if applicable, calculate the amount of the impairment.

Meaning of Impairment: Asset impairment occurs when the fair market value of a fixed asset falls…

Answered: Penn Resources, a successful efforts…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Penn Resources, a successful efforts company, has three proved fields, 1,2, and 3. Costs and cash flows for the three fields are as follows:

	Field 1	Field 2	Field 3
Net capitalized costs	5,500,000	8,000,000	9,000,000
Expected undiscounted future cash flows	4,700,000	9,000,000	8,500,000
Expected discounted future cash flows	3,900,000	8,000,000	7,600,000

For each field, (1) determine if impairment is required, and (2) if applicable, calculate the amount of the impairment.

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