Yu Company Purchased a Producing Oil Well for $5,000,000

question 36

Multiple Choice

Yu Company purchased a producing oil well for $5,000,000.The well was expected to produce 500,000 barrels of oil over its useful life.During 2012 the company extracted 120,000 barrels of oil.The oil was sold for $40 per barrel.Assuming that the company incurred $1,440,000 in operating expenses other than depletion during 2012,how much net income would Yu report in 2012?

• A) $2,160,000
• B) $480,000
• C) $3,360,000
• D) $3,560,000

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Definitions:

Buffer

A neutral or positive statement designed to allow the writer to delay, or buffer, the negative message.

Goodwill

The value of a business beyond its tangible assets, including its reputation and patronage. Also, a favorable condition and overall atmosphere of trust that can be fostered between parties conducting business.

Negative Message

Communication that conveys a refusal, rejection, or other unfavorable information, often requiring careful wording to maintain goodwill.

Apologies

Expressions of regret for past actions or statements, often used to mend relationships or acknowledge mistakes.