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ACC Oil & Gas Accounting 3307 Spring 2020
Test #2 – Acquisition Drilling Development Costs
Name: ______________________________________________________________________________
Email Address: ________________________________________________________________________
Date: ______________________
Score: ______________________
1. Cowboy Exploration & Production Company incu
ed the following costs during 2019:
Activity Lease A Lease B Lease C
Jan 01, 2019 Acquisition Costs Purchased
1,000 acres
@ a lease
onus of
$100/acre
Purchased 800
acres @ a lease
onus of $70/acre
Purchased 600
acres at $60/acre
onus
Jan 15, 2019 G&G Costs $60,000 $30,000 $40,000
Mar 12, 2019 Contractor’s fee $1,890,000 $430,000 $1,705,000
Mar 22, 2019 Equipment rental $100,000 $90,000 $130,000
Mar 30, 2019 Drilling fluid $30,000 $20,000 $50,000
Apr 10, 2019 Fuel $18,000 $22,000 $14,000
Apr 15, 2019 Drill bits $55,000 $35,000 $60,000
Apr 30, 2019 Cementing services $35,000 $13,500 $30,000
Jun 1, 2019 Hauling & transportation $20,000 Drilling completed;
dry hole
$50,000
Jun 26, 2019 Production casing $56,000 $75,000
Aug 1, 2019 Tank battery $310,000 $395,000
Sept 13, 2019 Flow lines & connections $428,000 $176,000
Sept 15,2019 Pumping unit motor and
accessories
$45,000 $135,000
Sept 28, 2019 Casing head & connections $112,000 $260,000
Oct 4, 2019 Tubing $75,000 $70,000
Oct 18, 2019 Separating & treating
equipment
$150,000 $90,000
Oct 21, 2019 Measuring equipment $60,000 $150,000
Oct 30, 2019 Testing & acidizing $135,000 $80,000
12/31/2019 Production during XXXXXXXXXX,000
l.
120,000 Mcf
10,000
l.
100,000 Mcf
12/31/2019 Estimated Proved Reserves 950,000
l.
450,000 Mcf
650,000
l.
300,000 Mcf
12/31/2019 Estimated Proved Developed
Reserves
100,000
l.
200,000 Mcf
300,000
l.
120,000 Mcf
12/31/2019 Lifting Costs $40,000 $25,000
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Additional information to consider:
• The fair market values of the surface and mineral rights were determined by a qualified appraiser as follows
Lease A Surface rights $180,000
Mineral rights $140,000
Lease B Surface rights $400,000
Mineral rights $100,000
Lease C Surface rights $190,000
Mineral rights $240,000
• On July 31, 2019 Lease B is determined to be 70% impaired.
• Compute DD&A for the year ended 12/31/2019 using a common unit of measure based on BOE.
• During 2019 Cowboy Exploration & Production Company produced 30,000
l. of oil and sold 28,500
l. to
UHD Pipeline Company at $1.75/gallon.
• On December 31, 2019, Lease B is considered to be 100% impaired and is abandoned.
From the data above:
(1) Prepare the necessary journal entries.
(2) Prepare an Income Statement for Cowboy Exploration & Production
Company using the Successful Efforts method of accounting considering the
necessary acquisition, exploration, drilling and development and production
costs.