Lexington Energy owns only one lease in the United States, Lease Q. The following information for Lease Q, which is burdened with a 1/6 royalty, is as of 12/31/20XD.

All reserve, production, and sales data apply only to Lexington Energy.

Additional data: Lexington also placed in service on 8/1/20XB a building that cost $140,000 and has a life of 10 years, with a salvage value of $9,000. The building houses the corporate headquarters that supports oil and gas operations in the United States and non–oil and gas operations in Canada. The operations conducted in the building are general in nature and are not directly attributable to any specific exploration, development, or production activity. Since the building is not directly related to exploration, development, or production and supports activities in more than one cost center, it is depreciated using straight-line depreciation for financial accounting.

REQUIRED: Compute DD&A for 20XD for the following accounting methods.

a. Tax: Assume Lexington is an independent producer (ignore percentage depletion) and accumulated depletion is $10,000. Use proved reserves to compute cost depletion.

b. Tax: Assume Lexington is an integrated producer and accumulated depletion is $10,000. Use proved reserves to compute cost depletion.

c. Successful efforts: Assume accumulated DD&A—proved properties is $5,000; accumulated DD&A—wells is $100,000.

d. Full cost: Assume exclusion of all possible costs from the amortization base.
Assume accumulated DD&A is $400,000. Ignore the revenue method.

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G&G, direct ..... Acquisition costs Test-well contributions. Wells-in-progress-IDC (incurred 6/24/20XD). $ 40,000 12,000 70,000 80,000 Wells-in-progress-L&WE...... 6,000 Wells L&WE (end of 2nd year). 250,000 Wells IDC (incurred in 20XB, and all productive) 600,000 Future development costs 400,000 Proved reserves, 12/31/20XD... 300,000 bbl Proved developed reserves, 12/31/20XD Production Sales.... 100,000 bbl 18,000 bbl 15,000 bbl