Natural resources the three types of costs incurred in oil, Ask an Expert

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NATURAL RESOURCES. The three types of costs incurred in oil production are acquisition costs (costs to acquire the oil fields, minus the cost of the land, plus the present value of future cash flows necessary to restore the site), exploration costs (costs of drilling), and development costs (pipes, roads, and so on, to extract and transport the oil to refineries). Should each of these costs be capitalized or expensed? Explain.

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