Fundamentals of Oil & Gas Accounting 5th Edition by Rebecca Gallun, Charlotte Wright

تمرين 8

The Hill Lease is operated by Harper Corporation. The foreman of the Hill Lease
must make a decision regarding the replacement of a pumping unit on the lease. The
foreman has identified three possible alternatives:
Alternative 1
Purchase a new pumping unit. The foreman has located a vendor willing to sell the
unit needed for a delivered cost of $65,000 FOB destination (i.e., the manufacturer
pays freight to the destination point).
Alternative 2
The Odessa Lease, which is also operated by Harper Corporation, has a surplus
pumping unit that could be used. If the Odessa Lease equipment is used, the
Odessa Lease would be charged with the cost of repairing the unit that would then
be transferred to the Hill Lease at Condition B.
Alternative 3
The Midland Lease, which is also operated by Harper Company, has a surplus
pumping unit that could be used. If the Midland Lease unit is used, the equipment
would be transferred unrepaired at Condition C.
Other information: The current market price for the unit is $70,000.
REqUIRED: Determine what the foreman on the Hill Lease should do.