During the year ended 30 June 20X5, Gem Stone Ltd acquired two areas of interest Site A and Site B.The exploration and evaluation activities at Site A amounted to $64454401. The costs relate to the acquisition of rights to explore the area, geological and geophysical studies as well asexploratory drilling and sampling.The exploration and evaluation activities at Site B amounted to $11438859.In the year ending 30 June 20X6, oil was discovered at Site A.It is estimated that Site A has 4823866 barrels of oil. As a result, Gem Stone Ltd erected an oil rig at Site A on 1 July 20X6. The cost of the oil rig amounted to $15716713. The oil rigcommenced production on 1 July 20X6.At the end of the production at Site A, Gem Stone is required to dismantle the oil rig, remove it and return the site to its original condition. After consulting with its own engineers andenvironmentalists, Diamond estimates that the present value of the removal and restoration costs relating to the development and construction activities will be $6846213.By 30 June 20X7, Site B was abandoned, while 1302280 barrels of oil are extracted from Site A at a production cost (excluding the restoration cost) of $370269.The company has sold half of these barrels at $81 per barrel.The tax rate is 30%.What was the after tax profit or loss recognised by Gem Stone Ltd as at 30 June 20X7?PLEASE ENTER YOUR ANSWER IN WHOLE NUMBERS WITH NO COMMAS OR DOLLAR SIGNS (EG $1,000,000 SHOULD BE SHOWN AS 1000000; -$1,000,000 SHOULD BESHOWN AS -1000000).Answer:

Name: During the year ended 30 June 20X5, Gem Stone Ltd acquired two areas
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: During the year ended 30 June 20X5, Gem Stone Ltd acquired two areas of interest Site A and Site B.The exploration and evaluation activities at Site A amounted to $64454401. The costs relate to the acquisition of rights to explore the area, geologic

After-tax profit refers to the sum value of money or profit that remained at an entity after paying…

Business

Accounting

nd evaluation activities at Site B amounted to $11438859. g 30 June 20X6, oil was discovered at Site A. t Site A has 4823866 barrels of oil. As a result, Gem Stone Ltd erect uction on 1 July 20X6. production at Site A, Gem Stone is required to dismantle the oil i Diamond estimates that the present value of the removal and resto Site B was abandoned, while 1302280 barrels of oil are extracte sold half of these barrels at $81 per barrel.

nd evaluation activities at Site B amounted to $11438859. g 30 June 20X6, oil was discovered at Site A. t Site A has 4823866 barrels of oil. As a result, Gem Stone Ltd erect uction on 1 July 20X6. production at Site A, Gem Stone is required to dismantle the oil i Diamond estimates that the present value of the removal and resto Site B was abandoned, while 1302280 barrels of oil are extracte sold half of these barrels at $81 per barrel.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: An asset for drilling was purchased and placed in service by a petroleum production company. Its…

A: solution given cost of asset (P) =60000 salvage value (L) =12000 n…

Q: Gem Limited commences operations on 1 January 2019. During 2019 Gem Limited explores three areas and…

Q: Placid Oil Corporation purchased an offshore lease c total acres. Proved reserves are found on a…

A: workings : Proved property = proved reserves/ Total Acres x offshore Lease…

Q: In 20X1, ABC Co. paid P1M to purchase a land containing a total estimated 160,000 tons of…

A: Depletion rate per ton: = [Purchase cost - salvage value] / capacity of extraction Purchase…

Q: Colorado Mining paid $616,000 to acquire a mine with 44,000 tons of coal reserves. The financial…

A: Lets understand the basics. Depletion method is used where extraction of minerals are made by the…

Q: Oil Company purchased an oil well for OMR 630,000. The well contains an estimated 120,000 barrels of…

A: Depletion expense refers to the charge to the income statement for extraction and use of natural…

Q: Pharoah Company purchased for $4,543,000 a mine that is estimated to have 45,430,000 tons of ore and…

A: Introduction: Depletion: Decreasing value of assets over its useful life period called as Depletion.…

Q: News and is calculated to hold 350.000 barrels of oll There is no residual value Which journal entry…

A: The depreciation expense is recorded for the fixed assets of the business. The depletion expense is…

Q: Depreciation by Two Methods; Sale of Fixed Asset New lithographic equipment, acquired at a cost of…

A: a) Straight line method: Depreciation = =843,750-72,6005=$154,230 Year DepreciationExpense…

Q: 16. Ebasan Company is involved in the exploration for mineral resources. Its policy is to recognize…

A: The exploration assets are generally recognized at the cost initially. The intangible exploration…

Q: Seif Company made the following expenditures in 2021: a. Recompletion costs on well # 560 of…

A: Rules for EntriesPersonal Account: Related to Person or Firm.Receiver will be debited and Giver will…

Q: Excavator Ltd had two areas of interest, Site A and Site B. The following costs were incurred to…

A: The cost that is incurred in the exploration of the process and the cost that is related to the…

Q: XYZ Ltd commences operations on 1 January 20X2. During 20X2, XYZ Ltd explores two areas and incurs…

A: The area of interest method is a method used for accounting of units in extractive industries as per…

Q: The Bass Strait Oil Company Limited incurs the following exploration and evaluation costs at two…

A: Journal includes the debit and credit sides to fill up the amounts for the financial transactions.

Q: Rhine Minerals Ltd has exploration licenses for the areas of interest of Forest and Twiggy.…

Q: Planet 22 In 2019 oil is discovered at Sunshine Site. Moonlight Site…

A: Journal entries using the area of interest method:- (a). Exploration and evaluation asset-Sunshine.…

Q: On 1 January 2009, SmartQuick Limited acquired a plant at a cost price of N$2.4 million. On the date…

A: Impairment loss is the decrease in the fair value of the asset as compared to the book value. Such…

Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

During the year ended 30 June 20X5, Gem Stone Ltd acquired two areas of interest Site A and Site B.
The exploration and evaluation activities at Site A amounted to $64454401. The costs relate to the acquisition of rights to explore the area, geological and geophysical studies as well as
exploratory drilling and sampling.
The exploration and evaluation activities at Site B amounted to $11438859.
In the year ending 30 June 20X6, oil was discovered at Site A.
It is estimated that Site A has 4823866 barrels of oil. As a result, Gem Stone Ltd erected an oil rig at Site A on 1 July 20X6. The cost of the oil rig amounted to $15716713. The oil rig
commenced production on 1 July 20X6.
At the end of the production at Site A, Gem Stone is required to dismantle the oil rig, remove it and return the site to its original condition. After consulting with its own engineers and
environmentalists, Diamond estimates that the present value of the removal and restoration costs relating to the development and construction activities will be $6846213.
By 30 June 20X7, Site B was abandoned, while 1302280 barrels of oil are extracted from Site A at a production cost (excluding the restoration cost) of $370269.
The company has sold half of these barrels at $81 per barrel.
The tax rate is 30%.
What was the after tax profit or loss recognised by Gem Stone Ltd as at 30 June 20X7?
PLEASE ENTER YOUR ANSWER IN WHOLE NUMBERS WITH NO COMMAS OR DOLLAR SIGNS (EG $1,000,000 SHOULD BE SHOWN AS 1000000; -$1,000,000 SHOULD BE
SHOWN AS -1000000).
Answer:

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

This question related with MFRS 116 (property,plant and equipment).
Week 8Gem Limited commences operations on 1 January 2019. During 2019 Gem Limited explores threeareas and incurs the following costs:Exploration and Evaluation expenditure ($)Desirable 25,000,000Undesirable 20,000,000Neutral 28,000,000In 2020 oil is discovered at Desirable Site. Undesirable Site is abandoned. Neutral Site has not yet reacha stage that permits a reasonable assessment at the existence or otherwise of economicallyrecoverable reserves, and active and significant operations in the area of interest are continuing. Inrelation to the exploration and evaluation expenditures incurred at Desirable Site and Neutral Site, 70percent of the expenditures related to property, plant and equipment, and the balance relates tointangible assets.In 2020, development costs of $48,000,000 are incurred at Desirable Site (to be written off on aproduction basis). $32,000,000 of this expenditure relates to property, plant and equipment, and thebalance relates to intangible assets. The development…
Gem Limited commences operations on 1 January 2019. During 2019 Gem Limited explores three areas and incurs the following costs:Exploration and Evaluation expenditure ($)Desirable 25,000,000Undesirable 20,000,000Neutral 28,000,000In 2020 oil is discovered at Desirable Site. Undesirable Site is abandoned. Neutral Site has not yet reached a stage that permits a reasonable assessment at the existence or otherwise of economically recoverable reserves, and active and significant operations in the area of interest are continuing. In relation to the exploration and evaluation expenditures incurred at Desirable Site and Neutral Site, 70 percent of the expenditures related to property, plant, and equipment, and the balance relates to intangible assets.In 2020, development costs of $48,000,000 are incurred at Desirable Site (to be written off on a production basis). $32,000,000 of this expenditure relates to property, plant, and equipment, and the balance relates to intangible assets. The…
8. In connection with your audit of the ABC Mall Corporation for the year ended December 31, 20X1, you noted that the company purchased P16,640,000 mining property estimated to contain 12,800,000 tons of ore. The residual value of the property is P1,280,000. The building used in mine operations costs P1,280,000 has an estimated life of fifteen years with no residual value. Mine machinery costs P2,560,000 with an estimated residual value of P512,000 after its physical life of 4 years. Following is the summary of the company’s operations for the first year of operations.Tons mined - 1,280,000 tonsTons sold - 1,024,000 tonsUnit selling price per ton - P4.40Direct labor - 1,024,000Miscellaneous mining overhead - 204,800Operating expenses (excluding depreciation) - 921,600Inventories are valued on a first-in, first-out basis. Depreciation on the building is to be allocated as follows: 20% to operating expenses, 80% to production. Depreciation on machinery is chargeable to production. How…