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

Exercise 4

Casing Oil, a successful efforts company, began operations on January 1, 20XA.
Assume the following facts about Casing's first two years of operations. All reserve
and production quantities apply only to Casing Oil's interest. Prepare the required
disclosures under SFAS No. 69. Assume a tax rate of 40%, and that Casing Oil does not qualify for percentage
depletion because it is an integrated producer. For purposes of the required
capitalization and amortization of 30% of IDC, assume nine months of amortization
in 20XA. Because of the short life of Lease R, also assume Casing elects to use the
unit-of-production method for calculating depreciation. Use proved reserves for
depletion and proved developed reserves for depreciation. Ignore the alternative
minimum tax and deferred taxes. (What is the significance of no estimated future
development costs on Lease R as of 12/31/XB?)