Global Co.

Subject Business Accounting

Keywords

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Question

Global Co. paid the following for well #1 that was drilled and completed on Block B during 2014:
Drill site preparation $175,000
Surface casing 56,000
Labor for drilling 900,000
Equipment rentals 20,000
Drill bits 190,000
Drilling fluid 30,000
Intermediate casing 300,000
Production Casing 100,000
Tank battery for storage 350,000
Labor to install tank battery 40,000
Flow lines 45,000
Labor to install flow lines 10,000
Christmas tree 200,000
Labor to install Christmas tree 25,000
Tubing 15,000
1. Classify each of the above as either IDC or tangible equipment
2. How will the above costs be reflected on the 12/31/14 balance sheet?

Solution Preview

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Global Co. paid the following for well #1 that was drilled and completed on Block B during 2014:
Drill site preparation $175,000
Surface casing 56,000
Labor for drilling 900,000
Equipment rentals 20,000
Drill bits 190,000
Drilling fluid 30,000
Intermediate casing 300,000
Production Casing 100,000
Tank battery for storage 350,000
Labor to install tank battery 40,000
Flow lines 45,000
Labor to install flow lines 10,000
Christmas tree 200,000
Labor to install Christmas tree 25,000
Tubing 15,000

1. Classify each of the above as either IDC or tangible equipment
Drill site preparation $175,000 IDC
Surface casing 56,000 Tangible Equipment...

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