San Joaquin Company began exploration of oil in Texas by paying \($600,000\) for the drilling rights on a large tract of land. The company drilled 10 oil wells on the land. Seven of the wells were unsuccessful “dry” holes, but the other three wells struck oil. Assume the company paid \($80,000\) each for the wells. In addition, the company paid \($75,000\) in other infrastructure costs associated with the drilling project.

Required

Calculate the capitalized cost of San Joaquin Company’s oil reserves under

(a) the full cost method and

(b) the successful efforts method.