Assistant lecture Alya elfedawy Acquisition costs Preliminary costs

Assistant lecture Alya elfedawy

Acquisition costs Preliminary costs Production costs Exploration costs Developme nt costs

Preliminary costs a. cost of acquiring the preliminary exploring b. geological and geophysical G&G � 1. � 2. Acquisition cost : a. lease bonuses b. brokers' fees c. recording fees d. legal costs e. other costs such as costs related obtaining mineral rights.

3. Exploration costs : a. Exploratory dry hole b. Exploratory well, successful 4. Development costs: a. Development dry hole b. Development well, successful 5. Production cost

Expenses Capitalized For Current year a lot of year

Successful efforts Full cost

N Cost item 1 geological and geophysical (G & G) Treatment under successful efforts (SE) Treatment under full costing (FC) Expense (E) Capitalize (C) 2 Acquisition cost C C 3 Exploratory dry hole E C 4 Exploratory well, successful C C 5 Development dry hole C C 6 Development well, successful C C E E 7 Production cost

GAS petroleum co. acquired a lease in the western desert in February 2005. The company incurred the following costs during 2005. � 140, 000 G & G cost. � 250, 000 Lease (acquisition cost). � 6, 000 exploratory dry holes. � 2, 600, 000 exploratory wells, successful. � 4, 000 development dry holes. � 1, 200, 000 development wells, successful. � 120, 000 production cost.

1 - Classify each cost item regarding the five stage. 2 - Compare between each accounting method regarding each cost item (Which cost is expense and capitalize). 3 - Calculate the total of expense and capitalize cost under each method.

Cost item Stage Successful efforts (SE) Full costing (FC) Preliminary costs Expense (E) 70, 000 Capitalize (C) 140, 000 Lease (acquisition cost) Acquisition cost C 125, 000 C 250, 000 Exploratory dry hole Exploration costs E 3, 000 C 6, 000 Exploration costs C 1, 300, 000 C 2, 600, 000 Development dry hole Development costs C 2, 000 C 4, 000 Development well, successful Development costs C 600, 000 C 1200, 000 Production cost E 60, 000 E 120, 000 geological and geophysical (G & G) Exploratory well, successful Production cost

1) successful efforts: A) Total expense cost= 140, 000 + 6, 000 + 120, 000 =6, 260, 000. B) Total capitalize cost= 250, 000 + 2, 600, 000 + 4, 000 + 1, 200, 000= 8, 050, 000. 2) Under full cost A) Total expense cost= 120, 000. B) Total capitalize cost= 140, 000 + 250, 000 + 6, 000 + 2, 600, 000 + 4, 000 + 1, 200, 000= 14, 190, 000

Petro get company acquired a lease in the western desert in april 2007. The company incurred the following costs during 2007. a. 80, 000 G&G cost b. 120, 000 lease c. 2500, 000 exploratory dry holes d. 1, 000 exploratory wells, successful. e. 1000, 000 development dry holes. f. 300, 000 development wells, successful. g. 50, 000 production cost.

Required: 1 - Classify each cost item regarding the five stage. 2 - Compare between each accounting method regarding each cost item (Which cost is expense and capitalize). 3 - Calculate the total of expense and capitalize cost under each method