Question

The following RRA information is taken from the 2015 annual report of Moonglo Energy Inc.
Balance of proved reserves: beginning of year.......... $ 1,070
Sales, net of production costs ................ (456)
Sales of reserves in place ................ ... (4)
Accretion of discount ..................... 125
Extensions and discoveries, net of related costs......... 162
Development costs incurred in year................ 629
Changes in estimates .................... 134
Balance of proved reserves: end of year ............. $ 1,660

Required
a. Prepare 2015 income statements for Moonglo on an RRA basis.
b. Moonglo reports a profit on its 2015 oil and gas operations, on a historical cost basis, of $ 173. Explain (in words only) why this profit differs from the RRA income you calculated in part a.
c. Which income number (RRA or historical cost basis) is more relevant? Which is more reliable? Explain why.



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  • CreatedSeptember 09, 2014
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