Question 1 An oil company in New Brunswick has a licence to operate an oil well

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Question 1 An oil company in New Brunswick has a licence to operate an oil well that has just started producing. The company expects to extract 385,000 barrels of oil this year and the total oil reserves are estimated to be 4,055,000 barrels. Their capitalized costs for the oil field are $11,480,000. What is the terminology used for depreciation of intangibles, such as a licence, called? Using units-of-production method, calculate how much of this expense they will report this year? (Round answers to the nearest whole dollar, e.g. 5,275.) Amortization expenses

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Terminology used for intangibles is amortisation Capitalised cost for oil field         11,480,000.00 Extraction during year               385,000.00 Total oil reserves           4,055,000.00 Expense to be reported = 11,480,000/4,055,000 * 385,000           1,089,963.01

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