Natural Resources Flashcards
1
Q
Where is natural resources classified on the balance sheet?
A
Noncurrent assets
2
Q
What costs are capitalized for land with natural resources?
A
- Acquisition
- Exploration
- Development
3
Q
How is depletion calculated?
A
Units of production method. How many tons of I expect to extract relative to how much you actually extracted.
4
Q
What are components of the amount capitalized?
A
- Acquisition Cost
- Exploration Costs- The amount I incurred to find the oil, etc.
5
Q
What are the two methods for to account for exploration costs?
A
Successful Efforts Method- Only the cost of successful exploration efforts are capitalized, unsuccessful efforts are expensed.
Full Cost- All costs of exploring are capitalized.
6
Q
What is the depletion entry?
A
Debit to Inventory
Credit: Contra account to Natural resources
