Buckley Oil Company, a successful efforts company, began operations January 1, 20XA. Assume the following facts about Buckley’s first two years of operations:

Assume a tax rate of 40%, and that Buckley does not qualify for percentage depletion because it is an integrated producer. Ignore deferred taxes and the alternative minimum tax. (What is the significance of no estimated future development costs on Lease Q and Lease T as of 12/31/XB?)

REQUIRED:
Prepare the required disclosures under ASU 932-235-50. All reserve and production quantities apply only to Buckley Oil’s interest. Ignore the computations for future income tax.

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12/31/20XA Item a. Acquisition costs b. G&G costs c. Drilling costs: IDC Tangible Life of equipment d. Drilling results: $ 50,000 Lease Q Lease T $ 40,000 $ 30,000 $ 35,000 $150,000 $100,000 80,000 10 years 10,000 Proved reserves Incomplete e. Estimated production of estimated proved reserves, bbl 20XB 7,500 20XC 15,000 20XD 10,000 f. Reserve estimate, bbl 12/31/XA Proved, at 12/31/X- 20XA 32,500 (decreases by estimated production) 20XB Proved developed at 12/31/XA (decreases 20XA by estimated production and increases 20XB as a result of estimated development) 25,000 20XC 10,000 27,500 25,000 20XC 10,000 g. Estimated tangible development costs (life, 10 years) 20XB $25,000 h. Estimated decommissioning costs 20XD $15,000 i. Price used in estimating reserves $ 52/bbl j. Estimated future production 20XB $75,000 costs based on year-end costs 20XC 150,000 20XD 100,000 k. Estimated current production costs/bbl $10/bbl