
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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![>Unit-of-production method
This method amortizes the costs of oil and gas industry activities and
is dependent on the accounting method chosen by the owner of the
assets. The following general formula shows the concept of unit-of-
production amortization:
[unamortized costs at end of period]+|production for period
[Amortization for period]=!
reserves at the beginning of period](https://content.bartleby.com/qna-images/question/3c719594-b992-4a86-a4a7-eb9bd0e9d6c6/cc9fdc5a-b6ff-4dd2-9c42-098c9947d115/lqwpsgu_thumbnail.jpeg)
Transcribed Image Text:>Unit-of-production method
This method amortizes the costs of oil and gas industry activities and
is dependent on the accounting method chosen by the owner of the
assets. The following general formula shows the concept of unit-of-
production amortization:
[unamortized costs at end of period]+|production for period
[Amortization for period]=!
reserves at the beginning of period
![Economic evaluation
>Example [Reference 1] Unit-of-production amortization
Assuming total capitalized costs at the end of the period are equal to
$1 500 000, accumulated amortization taken in prior periods is equal
to $500 000, estimated remaining recoverable reserves at the end of
the period are equal to 440 000 BOE, and production during the period
is equal to 60 000 BOE, calculate the amortization for the period using
the unit-of-production method.](https://content.bartleby.com/qna-images/question/3c719594-b992-4a86-a4a7-eb9bd0e9d6c6/cc9fdc5a-b6ff-4dd2-9c42-098c9947d115/jux3cya_thumbnail.jpeg)
Transcribed Image Text:Economic evaluation
>Example [Reference 1] Unit-of-production amortization
Assuming total capitalized costs at the end of the period are equal to
$1 500 000, accumulated amortization taken in prior periods is equal
to $500 000, estimated remaining recoverable reserves at the end of
the period are equal to 440 000 BOE, and production during the period
is equal to 60 000 BOE, calculate the amortization for the period using
the unit-of-production method.
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