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Somia Oil Company, uses successful cost approach, acquired the following lease Lease Acres Bonus/acre Term Type 5,000 $50 3 years Significant B 4,000 $75 2
Somia Oil Company, uses successful cost approach, acquired the following lease Lease Acres Bonus/acre Term Type 5,000 $50 3 years Significant B 4,000 $75 2 years Significant C-F 20,000 $40 10 years Individually Insignificant Assume that Somia Oil did not commenced any drilling on Lease A and drilling on lease B is not completed and company determined lease B to be 20% impaired. Based on past experiences, Somia oil has abandoned 60% of all individually insignificant unproved property without ever finding oil or gas. It takes Somia Oil Company an average of three years to determine whether a property will be proved or surrender. How much total impairment should company record at the end of the year? A. $480,000 B. 5160,000 C. $60,000 D. $220,000
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