Casing Oil, a successful efforts company, began operations on January 1, 20XA.

Assume the following facts about Casing’s first two years of operations. All reserve and production quantities apply only to Casing Oil’s interest.

Assume a tax rate of 40% and that Casing Oil does not qualify for percentage depletion because it is an integrated producer. For purposes of the required capitalization and amortization of 30% of IDC, assume nine months of amortization in 20XA. Because of the short life of Lease R, also assume Casing elects to use the unit-of-production method for calculating depreciation. Use proved reserves for depletion and proved developed reserves for depreciation. Ignore the alternative minimum tax and deferred taxes. What is the significance of no estimated future development costs on Lease R as of 12/31/XB?

REQUIRED: Prepare the required disclosures under ASU 932-235-50.

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Item a. Acquisition costs b. G&G costs c. Drilling costs: IDC Tangible Life of equipment 12/31/20XA d. Drilling results: e. Estimated production of estimated proved reserves, bbl f. Reserve estimate, bbl 12/31/XA: Proved, at 12/31/X- (decreases by estimated production) Proved developed at 12/31/ (decreases by estimated production and in- creases as a result of estimated development) g. Estimated tangible development costs h. Estimated decommissioning costs i. Price used in estimating reserves j. Estimated future production costs based on year-end costs k. Estimated current production costs /bbl 20XB 20XC 20XD Lease R $ 20,000 $ 40,000 Proved 20XA 20XB 20XC 20XA 20XB 20XC 20XB 20XD $250,000 $50,000 50,000 10 years reserves 10,000 7,500 9,000 26,500 16,500 9,000 15,000 16,500 9,000 $40,000 $20,000 $46/bbl Lease S $25,000 $50,000 XB $80,000 $60,000 20XC 20XD $720,000 $8/bbl Dry