1.United Petro Company classifies one of its long-lived assets as "held for sale." This asset had a carrying value of $230,000 and a fair value of $140,000 on December 31, Year 1. A year later, the fair value of the asset is $170,000. Estimated selling cost on this asset is $7,000 in both years. On December 31, Year 1, the company should recognize:

A.a loss of $67,000.

B.a loss of $90,000.

C.a loss of $97,000.

D.neither a gain nor a loss.

2.A run ticket at the time of the oil delivery records:

A.the basic sediment and water.

B.the gravity of the oil.

C.selling price.

D.all of the above items.

3.The posted price for West Texas Intermediate (WTI) is $120/bbl and the price adjustment is $0.10/degree higher for WTI crude oil with an API gravity higher than 40, and $0.12/degree lower for WTI crude oil with an API gravity below 40. South Plain Oil Corp. sold its crude oil with an actual gravity of 30. The company sold its oil at the price of:

A.$118.8/bbl.

B.$119/bbl.

C.$120/bbl.

D.$121/bbl.

4.Angeloil Co. is the operating owner, who is responsible for collecting and paying for severance taxes on oil production. When Angeloil Co. sells the oil to purchasers, it should:

A.debit production tax expense.

B.debit production tax payable.

C.credit accounts receivable.

D.debit royalty payable.

5.Gilbert Oil Company owns 100% of the working interest in a property, which is leased from Jane. Jane holds a 1/8 royalty interest in the lease. During this month, 3,000 (gross) barrels of oil (after correction for temperature, gravity, and BS&W) were produced and sold. Assume the price for oil is $80/bbl and the oil production tax is 5%.

A.Net royalty received by Jane is $30,000.

B.Production tax expense for Gilbert Oil Company is $10,500.

C.Gilbert Oil Company recognizes oil sales of $240,000.

D.Overall, the government collects production taxes of $10,500.

6.Tyrant Pump Corp. operates Lease Adama and Lease Bonehead. The company uses 15 barrels of oil obtained from Lease Adama as fuel on Lease Bonehead. Assume the oil is priced on both leases at $100/bbl and the production tax rate is 5%.

A.The 15 barrels of oil are considered as free fuel to Lease Bonehead.

B.Lease Adama incurs an operating cost of $1,500.

C.The value assigned to the 15 barrels of oil would normally be lower than the price at which the oil produced in the area could have been sold.

D.Production taxes of $75 must be paid.

7.Falcon Gas Inc. and Ike Gas Co. jointly own the Javelina Field. Falcon Gas Inc. owns 60% of the working interest and is the operating company. Ike Gas Co. owns 40% of the working interest. There is also a 1/8 royalty interest on the field. During this month, 120,000 Mcf was delivered to the purchasers of Falcon Gas Inc. and 75,000 Mcf was delivered to the purchasers of Ike Gas Co. The price of gas is $5.00/Mcf. Under the sales method, Falcon Gas Inc. should recognize in this month gas revenues of:

A.$0.

B.$525,000.

C.$585,000.

D.$600,000.

8.Joint operations may be undertaken in the form of:

A.joint venture of undivided interests.

B.legal partnership.

C.jointly owned corporation.

D.All of the above.