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Q1 Midterm

Camia Company purchased a drilling machine for $8.4 million that has a useful life of 10 years and no residual value. The machine included a drill housing component costing $2 million that needs replacing in 5 years. Camia uses straight-line depreciation and the successful effort method of accounting. In 2023, Camia drilled 15 oil wells costing $4 million each and depleted 30% of the oil discovered.

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2K views22 pages

Q1 Midterm

Camia Company purchased a drilling machine for $8.4 million that has a useful life of 10 years and no residual value. The machine included a drill housing component costing $2 million that needs replacing in 5 years. Camia uses straight-line depreciation and the successful effort method of accounting. In 2023, Camia drilled 15 oil wells costing $4 million each and depleted 30% of the oil discovered.

Uploaded by

수지
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Use the following information for the next two (2) questions:

On January 1, 2023, Camia Company purchased a drilling machine for P8,400,000 with useful
life of 10 years and no residual value. An important component of the machine is the drill
housing component that will need to be replaced in 5 years. The P2,000,000 cost of the drill
housing component is included in the P8,400,000 cost of the machine. The straight-line
depreciation is used.

During 2023, Camia Company incurred P4,000,000 in exploration cost for each of 15 oil wells
drilled in 2023. Of the 15 well drilled in 2023, 10 were dry holes. Camia used the successful
effort method of accounting. Camia depleted 30% of the oil discovered in 2023.

What total amount of depreciation should be recorded in 2023?


A.1,040,000

B.1,240,000

C.840,000

D.640,000
Answers:
1. A
2. C or D?
3. C
4. D
5. C
6. A
7. D
8. C
9. A
10. A
11. C
12. D
13. C
14. A
15. A
1.B
2.B
3.A
4.D
5.A
6.C
7.A
8.A
9.B
10.A
11.C
12.C (Tama ata to)
13.C
14.A
15.D

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