Wildcat Oil Company began operations on January 1, 20XA. The following facts relate to Wildcat’s first two years of operations. All reserve and production quantities apply only to Wildcat Oil’s interest.

Assume a tax rate of 40% and that Wildcat 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 lives of Lease R and Lease S, also assume Wildcat 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 and Lease S as of 12/31/XB?)

REQUIRED:

a. Prepare the required disclosures under ASU 932-235-50, assuming Wildcat is a successful efforts company.

b. Assume instead that Wildcat is a full cost company that amortizes all possible costs. Prepare only those disclosures that would differ under full cost accounting compared to successful efforts.

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12/31/20XA Item b. G&G costs Lease R a. Acquisition costs $ 50,000 $ 30,000 Lease S Lease T $ 40,000 $ 60,000 $ 35,000 $40,000 c. Drilling costs: IDC $160,000 $100,000 $135,000 Tangible Life of equipment 80,000 10 years 10,000 d. Drilling results: Proved reserves Incomplete Dry e. Estimated production of esti- 20XB 12,500 mated proved reserves, bbl f. Reserve estimate, bbl 12/31/XA 20XC 15,000 20XD 10,000 Proved, at 12/31 (decreases 20XA 37,500 by estimated production) 20XB 25,000 20XC 10,000 Proved developed at 12/31 20XA 15,000 (decreases by estimated pro- 20XB 20,000 10,000 duction and increases as a re- 20XC sult of estimated development) g. Estimated tangible development 20XB $25,000 costs h. Estimated decommissioning costs 20XD i. Price used in estimating reserves j. Estimated future production costs based on year-end costs k. Estimated current production costs/bbl 20XC 30,000 $15,000 $56/bbl 20XB $125,000 20XC 150,000 20XD 100,000 $10/bbl