Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 3

The Oklahoma Oil Company incurred acquisition, exploration, and development costs during 2016 as given in Table 1.
Table 1
The market price of oil during 2016 was $60 per barrel.
(a) Determine the cost basis for depletion on each parcel.
(b) During 2016, 1,200,000 barrels were extracted from parcel A at a production cost of $3,600,000. Determine the depletion charge allowed for parcel A.
(c) In part (b), if Oklahoma Oil Company sold 1,000,000 of the 1,200,000 barrels extracted during 2016 at a price of $75 per barrel, the sales revenue would be $75,000,000. If it qualified for the use of percentage depletion (15%), what would be the allowed depletion amount for 2016
(d) During 2016, 800,000 barrels were extracted (and sold) from parcel B al a production cost of $3,000,000. Assume that, during 2017, it is ascertained that the remaining proven reserves on parcel B total only 4.000,000 barrels (instead of the expected 4,200,000). This revision in proven reserves is considered a change in an accounting estimate that must be corrected during the current and future years. (A correction of previous years' depletion amounts is not permitted.) If 1,000,000 barrels are extracted during 2017, what is the total depletion charge allowed, according to the unit cost method