How Can I Do Depreciation and Depletion? Beth Yates Customer Success Team Lead, Team 2

Purpose The purpose of this class is to explain how WolfePak can calculate depreciation and depletion for company assets in a quick and efficient way and highlight the interaction with the General Ledger.

Fixed Assets Benefits Depreciate quickly and easily! Minimizes errors Tax basis and GAAP basis reporting No manual entries-WolfePak interacts with the General Ledger Record the book value of the asset

Depreciation Fixed Assets module-helps manage depreciation entries. WolfePak can accommodate a brand new setup or conversion Can have up to seven sets of books-Three sets of books are already defined: GL, TAX, and AMT (Alternative Minimum Tax) 30 Pre-defined Classes maintained by WolfePak. Need a new one? WolfePak will add a specific IRS Class Code to be maintained. User can have a User Defined Class Code.

Depreciation Need to Know Accounts for Depreciation Depreciation Method Depreciation Life Convention Does it need to be reported on Form 4562?

Setup Set up accounts: Asset, Accumulated Depreciation, and Depreciation Expense in Account Maintenance (F11). Set up Asset Books if more than the three pre- defined asset books are needed. Match to an existing book. Changes can be made at the asset level. Lock Detail Records to keep prior month/years depreciation from changes.

Asset Classes Asset Classes group the assets. Over 30 pre-defined classes. Others can be added. Default classes can be overridden. Add new classes in Asset Class Maintenance only if necessary.

Account Codes and Assets Tells WolfePak where the asset information pulls from and where the depreciation should post to when using Create GL Entries. Define the Default Class Assets Import from GL (recommended) or manually enter Is the asset New (default) or Used? Complete additional tabs for setup if applicable.

Import From GL Will import entries not previously entered based on asset accounts set up in Account Codes. WolfePak will auto-assign the asset number Override default class code, merge selected entries, split selected entries, delete selected entries Make note of the Import Time Stamp to Undo Prior if necessary. View assets in Asset Maintenance.

Adjust Accumulated Depreciation, Sec 179, and Bonus Depreciation Input fiscal year and book. Make adjustments Click Generate or Update

Create GL Entries Can create monthly or yearly entries for any existing book. Verify Tax Report before creating. View entries before creating. Asset changes after creating entries? No problem! WolfePak can create correcting entries

Reports Depreciation Schedule Tax Report GL Verification Report

GAAP Depletion Used to make entries to adjust Net Book Value via the assets accumulated depletion accounts. Pulls information from the GL that could originate from other modules such as AP, Check Stub, or GL.

The Flow Accounts Payable – enter the invoice/JIB received Check Stub Entry – record the revenue detail for each stub by asset (well) and production date General Ledger- Manual entries Update the Accumulated Depletion for the desired month.

Chart of Accounts One asset account for each type of asset (Leasehold, Intangible, etc.) Accumulated Depletion account for each type of asset At least one Depletion Expense account Revenue Accounts- Oil, Gas , and Product Sales are currently supported

Calculations Compute the Depletion Base – (Leasehold accounts – accumulated leasehold depletion) + (Intangible Accounts – accumulated intangible depletion) + (P&A accounts – accumulated P&A depletion) + (Tangible Accounts – accumulated Tangible depletion) = Depletion base   Compute the Unit Depletion Rate – Current Period Production / Current Reserves   Charge the depletion based on units of production for the current period – Depletion Base x Unit Depletion Rate

Setup Setup Company Maintenance Property Maintenance/Reserves Tab Proved Reserves (PR) look at the Reserve Study Proved Developed Reserves (PD) look at the Proved Developed Reserve Study Reserve Studies are added on the Property Maintenance/Reserves tab

Generate Depletion Calculate depletion in Depletion Reserves Reports Enter Month/Year effective date Review entries in View Trend (F4) Excel workbook created contains calculations Reports Depletion Schedule Reserve Listing

Depletion Depletion Calculations for tax purposes Automatically compiles current year property leasehold costs, production revenue sales and costs, and production revenue sales volumes from the WolfePak General Ledger System. Calculates both Percentage Depletion and Cost Depletion for a property and identifies the larger of the two deductions.

Depletion Setup Company Maintenance General Tab Current Cycle Tab GL Information Tab GL Account Tab

Lease/Property Information Used to maintain lease information Can enter information manually or Start Reporting Cycle and Import Values From GL only. Review for accuracy

Depletion Cycle Start Reporting Cycle Import Values from G/L Edit Imported amounts Compute Depletion

Calculation Example

Calculation Example

Reports 65% Limitation Report Cost Depletion Report Percent Depletion Report Create Annual GL Entries

Entries

Questions