Assume all costs incurred during the exploration and evaluation phases were capitalised, for the year ended 30 June 2024:
a) What are the amortisation rate and amortisation expense?
b) What is the depreciation expense related to the following assets:
the oil rig and helicopter landing site
sea-going vessels
production equipment
For each asset, briefly justify the choice of depreciation method.
c) What is the finance cost related to the restoration costs?
Keep 2 decimal places for the amortisation rate, and round to the nearest whole $ amount for other answers. No narration is required. Show all calculations.
In January 2019 XYZ ON Ltd acquired a permit to explore for and produce oil in an area located in Bass Strait. The financial year of XYZ Oil Lid ends on 30 June each year. XYZ O incurred, and capitalised, the costs shown below Year Details S Amount 2019-2021 Exploration and production right acquired 10,000,000 Geological survey undertaken by Olive Exploration 2.500,000 2021-2022 Exploration costs 4,500,000 Evaluation costs 1,500,000 2022-2023 Construction of oil rig in Bass Strait 18.000.000 Construction of helicopter landing site on olti 2,500,000 2022 2023 Seagoing vessels for transportation to from or tig 8.000.000 2022 2023 Production equipment acquired 5,200,000 in Aune 2022, the company's experts estimated that the deposit would produce 22.5 million barrels of oil to be profitably extracted over the production period of 10 years allowed by the company's permit. On of this informationthe area would commence July 2023 On 30 June 2023, engineers estimate that development and construction activities have resulted in $800,000 worth of restoration costs that XYZOI Lid is obligated to spend at the end of the mino's life under commonwealth logislation. The company nominates a discount rate of 6% as relevant for its oil operations, The useful life of the oil rig and helicopter landing site was 15 years starting on the date production commenced. The oil rig and helicopter landing site cannot be economically removed from the site. The songoing vessels had a useful life of 18 years commencing on 1 July 2023 and will be used for access to a production site of Western Australia - expected to be operational by the time production finishes in Bats Strait. The estimated useful life of the production equipment was 5 years from 1 July 2023. Al disposal valties at the end of relevant useful lives were zero Activities for the year ended 30 June 2024 were as follows: Production and sales in borrels Barrels of all produced 2.500,000 Barrels of all sold 2.200.000 Revenues and costs: Seling price of all $55 por barrel Production cost (excluding depreciation and amortisation) $81,325,000 Head office administration expenses allocated $4,500,000 Selling expenses $3,000,000 In January 2019 XYZ ON Ltd acquired a permit to explore for and produce oil in an area located in Bass Strait. The financial year of XYZ Oil Lid ends on 30 June each year. XYZ O incurred, and capitalised, the costs shown below Year Details S Amount 2019-2021 Exploration and production right acquired 10,000,000 Geological survey undertaken by Olive Exploration 2.500,000 2021-2022 Exploration costs 4,500,000 Evaluation costs 1,500,000 2022-2023 Construction of oil rig in Bass Strait 18.000.000 Construction of helicopter landing site on olti 2,500,000 2022 2023 Seagoing vessels for transportation to from or tig 8.000.000 2022 2023 Production equipment acquired 5,200,000 in Aune 2022, the company's experts estimated that the deposit would produce 22.5 million barrels of oil to be profitably extracted over the production period of 10 years allowed by the company's permit. On of this informationthe area would commence July 2023 On 30 June 2023, engineers estimate that development and construction activities have resulted in $800,000 worth of restoration costs that XYZOI Lid is obligated to spend at the end of the mino's life under commonwealth logislation. The company nominates a discount rate of 6% as relevant for its oil operations, The useful life of the oil rig and helicopter landing site was 15 years starting on the date production commenced. The oil rig and helicopter landing site cannot be economically removed from the site. The songoing vessels had a useful life of 18 years commencing on 1 July 2023 and will be used for access to a production site of Western Australia - expected to be operational by the time production finishes in Bats Strait. The estimated useful life of the production equipment was 5 years from 1 July 2023. Al disposal valties at the end of relevant useful lives were zero Activities for the year ended 30 June 2024 were as follows: Production and sales in borrels Barrels of all produced 2.500,000 Barrels of all sold 2.200.000 Revenues and costs: Seling price of all $55 por barrel Production cost (excluding depreciation and amortisation) $81,325,000 Head office administration expenses allocated $4,500,000 Selling expenses $3,000,000
