Buffalo Oil Company, a full cost company, provides the following information for the year ended December 31, 2020, relating to its properties located in the United States:

Present Value (PV) of future gross revenues: $50,000,000

PV of future related costs: $10,000,000

Capitalized costs of proved properties: $45,000,000

Unproved properties not being amortized: $5,000,000

Accumulated DD&A: ($6,000,000)

Income taxes: Ignore

a) Prepare a ceiling test and an entry, if necessary, for the write-off of capitalized costs.

b) Assuming the PV of future gross revenues is $46,000,000 but all other information is unchanged, prepare a ceiling test and an entry, if necessary for the right off of the capitalized costs.

Answer rating: 100% (QA)

Capitalized costs of proved properties 45000000 Add Unproved propert... View the full answer