Data as of 12/31/15 for Dry Hole Oil Company’s U.S. properties are as follows:

(This problem is similar to problem 14 in chapter 6.)

Dry Hole’s activities during 2016 were as follows:

a. Use T-accounts to accumulate costs.

b. Calculate DD&A for 2016, assuming no cost exclusions and using a common unit of measure based on BOE.

c. Calculate DD&A for 2016, assuming all possible cost exclusions and using a common unit of measure based on BOE. In addition, assume impairment for unproved properties was $75,000 and the allowance for impairment was $25,000 at 12/31/16.

Transcribed Image Text:

Unproved properties, control . . . Wells-in-progress unproved properties Dry exploratory wells on unproved properties. Abandoned costs of unproved properties. . Proved properties ... Wells and equipment. Accumulated DD&A $ 200,000 350,000 425,000 275,000 190,000 600,000 375,000