1.Dullus Oil Company retires one of its long-lived assets. Prior to the retirement, the long-lived asset has a net carrying value of $15,000 and its associated asset retirement obligation account has a balance of $28,000. The company pays $25,000 to settle the asset retirement obligation, while the retired asset is held and unsold. Upon the settlement, the company has to recognize:

A.a gain of $3,000.

B.a loss of $12,000.

C.a loss of 25,000.

D.neither a gain nor a loss.

2.Creamy Oil Inc. noticed a pipeline leak. While there is no specific claim asserted, the company determines the remediation cost would be $2,300,000. The company:

A.should recognize an environmental remediation liability of $2,300,000.

B.is required to disclose this situation but not to recognize a liability.

C.is not required to recognize the liability at this moment.

D.is required to recognize the liability only when a litigation is brought to the court.

3.An oil company plans to sell its facility before the end of its useful life.

A.The company is not required to recognize the asset retirement obligationassociated with this asset.

B.The company is required to recognize the asset retirement obligation associated with this asset, if applicable.

C.If the company is a full cost company, it is not required to recognize the asset retirement obligation associated with this asset.

D.If the company is a successful efforts company, it is not required to recognize the asset retirement obligation associated with this asset.

4.Texarkana Oil Corp., a successful efforts company, considers its Alpha Field as an asset group for purposes of testing for impairment. If the carrying value of Alpha Field exceeds the discounted future net cash flows associated with the Field,

A.the asset is impaired.

B.the impairment loss is the difference between the carrying value of the Field and the fair value of the Field.

C.the company may or may not have to recognize an impairment loss.

D.All of the above are correct.

5.Oilimpia Co., a successful efforts company, classifies one of its platforms as being held for sale.The platform has a net carrying value of $6,800,000, although its fair value is $6,850,000. The company estimates that the selling cost is $320,000. The company should recognize:

A.a gain of $50,000.

B.a loss of $270,000.

C.a loss of $320,000.

D.neither a gain nor a loss.

6.The following information is related to one of an oil company's long-lived asset, Equip A. The company follows the successful efforts accounting. What is the impairment amount that the company should recognize?

Long-lived asset - EquipA$360,000

Accumulated depreciation - Long-lived asset (EquipA)120,000

Undiscounted future net cash flows from EquipA250,000

Fair value of Equip A200,000

A.$0.

B.$10,000.

C.$40,000.

D.$50,000.

7.When estimating the cash flows for impairment purposes regarding its complete asset,a successful cost oil company should include cash outflows associated with future expenditures:

A.necessary to maintain an asset's existing service potential.

B.that would increase the long-lived asset's service potential.

C.which substantially improve the useful life of the asset.

D.all of the above are correct.

8.When a long-lived asset is classified as being held for sale,

A.depreciation on the asset should cease.

B.depreciation on the asset should continue if the asset continues in use.

C.this asset should be recorded on the balance sheet at its fair value.

D.this asset should be recorded on the balance sheet at its carrying value.