On January 1, 2000, GAZ Ltd. purchased a producing oil well, with an estimated life of 15 years, and started operating it immediately. The management ofGAZ Ltd. calculated the present value of future net cash flows from the well as \($1,500,000\). The discount rate used was 10%, which is the company's expected return on investment. During 2000, GAZ Ltd. recorded cash sales

(net of production costs) of \($600,000\). GAZ Ltd. also paid \($50,000\) cash dividends during 2000.

Required

a. Prepare the income statement ofGAZ Ltd. for the year ended December 31, 2000, using RRA.

b. Prepare the balance sheet ofGAZ Ltd. as at December 31, 2000, using RRA.

c. Summarize the perceived weaknesses of RRA accounting.

d. Why does SFAS 69 require that a 10% discount rate should be used by all oil and gas firms rather than allowing each furm to select its own discount rate?