Question : 181.Kotter Mining Company purchases a gravel pit for $2,500,000. It : 1244486

181.Kotter Mining Company purchases a gravel pit for $2,500,000. It estimates that 5,000,000 tons of gravel can be extracted over the pit’s useful life. If 900,000 tons are extracted and sold during the first year, how much depletion expense should be recorded?

 

a.

$337,500

b.

$450,000

c.

$225,000

d.

$112,500

 

 

 

182.Kotter Mining Company purchases a gravel pit for $2,500,000. It estimates that 5,000,000 tons of gravel can be extracted over the pit’s useful life. If 1,000,000 tons are extracted during the first year but only 770,000 tons are sold, what amount should be recorded for Gravel Inventory and Accumulated Depletion, respectively?

 

a.

$115,000 and $385,000

b.

$115,000 and $500,000

c.

$385,000 and $385,000

d.

$385,000 and $115,000

 

 

 

183.Failure to record depletion for a given accounting period will result in

 

a.

understated total assets.

b.

overstated total liabilities.

c.

overstated net income.

d.

understated total liabilities.

 

 

 

184.In 20×7, Kallen Enterprises purchased an oil well for $12,000,000. It is estimated that 80,000,000 barrels can be extracted from the well. Depletion expense during 20×8, when 2,000,000 barrels were extracted and sold, totaled

 

a.

$3,333,333.

b.

$300,000.

c.

$33,333.

d.

$30,000.

 

 

 

185.Plant assets used in conjunction with a natural resource typically are depreciated

 

a.

using income tax depreciation.

b.

on the same basis as depletion is computed.

c.

using an accelerated depreciation method.

d.

on a straight-line basis.

 

 

 

186.A company purchases an oil well for $200,000. It estimates that the well contains 250,000 barrels, has a ten-year life, and has no residual value. If the company extracts and sells 20,000 barrels during the first year, how much depletion expense should be recorded?

 

a.

$100,000

b.

$40,000

c.

$16,000

d.

$20,000

 

 

 

 

187.Which of the following statements is true about successful efforts accounting?

 

a.

The cost of successful exploration is recorded as an asset and is not written off.

b.

It is a depreciation method.

c.

The cost of a dry well would be written off immediately as a loss.

d.

All costs are recorded as assets and then depleted over the resource’s useful life.

 

 

 

188.Which of the following statements is true about the full-costing method?

 

a.

The cost of a dry well would be written off immediately as a loss.

b.

All costs are recorded as assets, and then depleted over the resource’s useful life.

c.

All costs are written off immediately as a loss.

d.

All costs are recorded as assets, but remain on the books as assets.

 

 

 

189.The exclusive right to sell a product within a certain geographic area is called a

 

a.

leasehold.

b.

copyright.

c.

franchise.

d.

patent.

 

 

 

190.A contract limiting the rights of others to go into business in a specific industry or line of business for a specified period is called a

 

a.

noncompete covenant.

b.

copyright.

c.

patent.

d.

trademark.