Advanced Accounting course

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Page 4 of 4 Question 4(11 marks) 23 min coductive oil well. It proved www at the end of 2018 is gross revenues less 20. the oil well is expected to be On lanuary 1. 2018, ABC LTD. started its business by purchasing a product serves from the well are expected to generate $100,000 cash flow at the $120.000 at the end of 2019 and $90,000 at the end of 2020. Net sales is prose production costs. Net sales equals cash flows. On January 1, 2020, the oil well is ex dry, with no environmental liabilities. The management of ABC Ltd. Wishes to prepare fi statements on a present value basis with an interest rate of 10%. The following informatie known about the well at the end of 2018. ABC Ltd. Wishes to prepare financial Actual cash flow in 2018 amounted to $90,000. Changes in estimates: Due to improved recovery (of oil from well), end of year cash flows for 2019 and 2020 are estimated to be $135,000 and $110,000 respectively. Required: 1. Prepare the Income Statement for ABC Ltd. For 2018 from its proved oil reserves. (8 marks) 2. Management of some firms have expressed serious concerns about the reliability of present value information for oil and gas companies. Outline three of these concerns. (3 marks) Page 4 of 4 Question 4(11 marks) 23 min coductive oil well. It proved www at the end of 2018 is gross revenues less 20. the oil well is expected to be On lanuary 1. 2018, ABC LTD. started its business by purchasing a product serves from the well are expected to generate $100,000 cash flow at the $120.000 at the end of 2019 and $90,000 at the end of 2020. Net sales is prose production costs. Net sales equals cash flows. On January 1, 2020, the oil well is ex dry, with no environmental liabilities. The management of ABC Ltd. Wishes to prepare fi statements on a present value basis with an interest rate of 10%. The following informatie known about the well at the end of 2018. ABC Ltd. Wishes to prepare financial Actual cash flow in 2018 amounted to $90,000. Changes in estimates: Due to improved recovery (of oil from well), end of year cash flows for 2019 and 2020 are estimated to be $135,000 and $110,000 respectively. Required: 1. Prepare the Income Statement for ABC Ltd. For 2018 from its proved oil reserves. (8 marks) 2. Management of some firms have expressed serious concerns about the reliability of present value information for oil and gas companies. Outline three of these concerns