The following supplemental RRA information is taken from the 2015 annual report of HL Oil & Gas Ltd.HL Oil & Gas Ltd.Statement of Changes in Standardized MeasureYear Ended December 31, 2015Present value, January 1, 2015 …………….. $ 6,500 Sales of oil and gas, net of production costs ………… (2,000) Changes in prices of oil and gas, net of changes in production costs… 1,200 Extensions and discoveries of proved reserves, net ……….. 1,500 Accretion of discount………………… 700 Revisions to quantity estimates …………….. (200) Present value, December 31, 2015 ……………. .. $ 7,700Required a. Prepare an income statement for 2015 on an RRA basis. b. Use the concepts of relevance and reliability to explain why the standardized measure is not applied to unproved reserves in RRA. c. Explain why present value calculations for oil and gas reserves lay down a mandatory 10% discount rate. What is an advantage and disadvantage to requiring all firms to use a common discount rate?View Solution:
The following supplemental RRA information is taken from the 2015



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