DEPLETION OF NATURAL-GAS FIELD. The Mudcat Gas Company owns an operational natural-gas field in Oklahoma. When gas production began in 19x1, the gas field had a depletable cost of $156,217,500. Estimated recoverable gas was 104,145,000 cubic feet. In 19x8, Mudcat decided to increase production from this field by drilling two new wells into the field and by adopting a new recovery technique. The new technique was expected to increase the amount of gas recoverable, and the additional wells were expected to permit more gas to be recovered each year. During 19x8 the new wells were completed at a cost of $9,541,500. The equipment to employ the new gas recovery technique was also installed in 19x8 at a cost of $17,615,000.

Increased production and use of the new recovery technique began in January 19x9.

The following data are available:

REQUIRED:
1. What was the depletion rate when gas production began in 19x1?
2. What was the book value of the gas field at the end of 19x8 but before the addition of the cost of the new wells and the recovery technique?
3. What is the depletion rate for 19x9?
4, Record the 19x9 depletion if Mudcat produces 3,217,000 cubic feet of natural gas.

Transcribed Image Text:

Gas produced, 19x1-19x8 Gas recoverable, 1/1/x9 20,150,000 cu. ft. 105,620,000 cu. ft.