1.The asset impairment rules underASC 932-360-35-11should be applied to the oil and gas assets of:

a)the successful companies only.

b)the full cost companies only.

c)both the successful and the full cost companies.

d)either the successful or the full cost companies.

2.Camel Syntech Co. agreed to pay Econergy Co. a bottom-hole contribution $33,000 if Econergy Co. drilled a test-well with a minimum depth of 6,000 feet. Due to uncertain geological issues, the well was abandoned after drilling to 5,000 feet.

a)Camel Syntech Co. should pay Econergy Co. $33,000.

b)Econergy Co. should pay Camel Syntech Co. $33,000.

c)Camel Syntech Co. should pay Econergy Co. $16,500.

d)Camel Syntech Co. is not required to pay Econergy Co.

3.Delco Oil Co. expects that the relative proportion of oil to gas extracted in the current period remain the same. Delco Oil Co. should calculate DD&A using:

a)oil only.

b)gas only.

c)either oil or gas.

d)the dominant mineral method.

4.Which of the following statements is TRUE?

a)The quantity of Petroleum initially in place does not change.

b)The amount of total reserves remains unchanged.

c)The price of oil or gas does not fluctuate.

d)Reserve estimates are not subject to revision.

5.Zeta Co. drills a new well on undrilled acreage within a productive area.

a)The well shall be classified as a development well.

b)The well shall be classified as an exploratory well.

c)If the well is drilled in an offset location, the well shall be classified as an exploratory well.

d)None of the above is correct.

6.Lubbock Oil Co. incurred $250,000 in drilling costs prior to deciding whether to complete the well. The company estimates that the completion costs are $120,000 and the discounted future net cash flows from the sale of the oil and gas from this well is expected to be $200,000.

a)The companywill havea loss of $170,000 in total for this well if the well is completed.

b)The company should not complete the well.

c)The companywill havea gain of $80,000 in total for this well if this well is completed.

d)The company should complete the well only if the discounted future net cash flows from the sale of the oil and gas from the well is $370,000.

7.According to the SEC, a company is NOT allowed to disclose:

a)proved reserves.

b)probably reserves.

c)prospective reserves.

d)possible reserves.

8.Sioux Petroleum Co., a successful efforts company, drilled a dry exploratory well at the cost of $150,000. Later, the company drilled another exploratory well on the same property at the cost of $200,000 and it was successful. Sioux Petroleum Co. should:

a)expense $200,000.

b)expense $350,000.

c)expense $150,000.

d)capitalize $350,000.

9.Hansel Energy Co. signed a dry-hole contribution agreement with Gretel Oil Inc. According to the agreement, Hansel Energy Co. may have to pay $10,000 to Gretel Oil Inc. As a result of the drilling, the well is successful to find commercially producible reserves. Hansel Energy Co. has to pay Gretel Oil Inc.:

a)$0.

b)$5,000.

c)$10,000.

d)None of the above.