Depletion Flashcards
The most common method of computing depletion is
a. Percentage depletion method
b. Decreasing charge method
C. Straight line
d. Production method
C. Straight line
Depletion expense
a. Is usually part of cost of goods sold.
b. Includes tangible equipment in the depletable amount.
c. Excludes intangible development cost from the depletable amount.
d. Excludes restoration cost from the depletable amount.
a. Is usually part of cost of goods sold.
Information needed to compute a depletion charge per unit includes the
a. Estimated total amount of resources available.
b. Amount of resources removed during the period.
c. Cumulative amount of resources removed.
d. Amount of resources sold during the period.
b. Amount of resources removed during the period.
Which accurately describes the GAAP regarding the accounting for the costs of drilling dry holes in the oil and gas industry?
a. Successful effort method
b. Full cest method
c. Both successful effort method and full cost method
d. Neither successful effort nor full cast method
c. Both successful effort method and full cost method
Which of the following is not part of depletable amount?
a. Acquisition cost öf the mineral resource deposit
b. Exploration cost
c. Tangible equipment used to extract the mineral resource
d. Intangible development cost such as drilling and tunnel
c. Tangible equipment used to extract the mineral resource
Exploration and evaluation expenditures are incurred
a. When searching for an area that may warrant detailed exploration even though the entity has not yet obtained the legal rights to explore a specific area.
b. When the legal rights to explore a specific area have been obtained but the technical feasibility and commercial viability of extracting a mineral resource are not yet demonstrable.
c. When a specific area is being developed and preparations for commercial extraction are being made.
d. In extracting mineral resource and processing the resource to make it marketable or transportable.
b. When the legal rights to explore a specific area have been obtained but the technical feasibility and commercial viability of extracting a mineral resource are not yet demonstrable.
When is an entity required to recognize exploration and evaluation expenditure as an asset?
a. When such expenditure is recoverable in future periods.
b. When the technical feasibility and commercial viability of extracting the associated mineral resource have been demonstrated.
C. When required by the entity’s accounting policy for recognizing exploration and evaluation asset.
d. Such expenditure is always expensed as incurred.
C. When required by the entity’s accounting policy for recognizing exploration and evaluation asset.
Which of the following expenditures would never qualify as an exploration and evaluation asset?
a. Expenditure for acquisition of right to explore
b. Expenditure for exploratory drilling
c. Expenditure related to the development of mineral resource
d. Expenditure for activity in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource
c. Expenditure related to the development of mineral resource
An entity is required to consider which of the following in developing accounting policy for exploration and evaluation activities?
a. The requirements and guidance in Standards and interpretations dealing with similar and related issues
b. The definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses
c. Recent pronouncements of standard-setting bodies
d. Whether the accounting policy results in information that is relevant and reliable
d. Whether the accounting policy results in information that is relevant and reliable
Which of the following is not a disclosure required in relation to exploration and evaluation expenditures?
a. Information about commerdial reserve quantity
b. Accounting policy for exploration and evaluation expenditures
c. The amounts of operating and investing cash flows arising from exploration and evaluation of mineral resources
d. Information recognized in the financial statements arising from the exploration and evaluation of mineral resources
a. Information about commerdial reserve quantity
