Optimistic Oil Company incurred the following costs during the years 2016 and 2017:

2016

a. Contracted and paid $50,000 for G&G surveys during the year.

b. Leased acreage in four areas as follows:

1) Williams lease—500 acres @ $50 per acre bonus; other acquisition costs, $2,000 2) Van Dolah lease—800 acres @ $100 per acre bonus; other acquisition costs,

$3,000 3) Sauer lease—200 acres @ $60 per acre bonus; other acquisition costs, $500 4) Raupe lease—600 acres @ $30 per acre bonus; other acquisition costs, $800 Each lease had a delay rental clause requiring payment of $2 per acre if drilling was not commenced by the end of one year. Also, each of the above leases was considered individually significant.

c. The company also leased 10 individual tracts for a total consideration of

$60,000. The tracts are considered to be individually insignificant and are the first insignificant unproved properties acquired by Optimistic.

d. The company incurred $1,000 in costs to maintain lease and land records in 2016.
Also, costs of $8,000 were incurred to successfully defend a title suit concerning the Williams lease.

e. During 2016, the company incurred the following costs in connection with the Williams lease when drilling an exploratory well:

Completion costs in connection with the above well were as follows:

f. An exploratory well was drilled on the Van Dolah lease in 2016 on a turnkey basis to 9,000 feet. The contractor’s charge was $300,000, which included $40,000 for casing. At the end of 2016, a decision had not been made to complete or abandon the well. Both criteria for delaying classification of the well were met.
g. At the end of 2016, the Raupe lease was impaired by 40%, and the Sauer lease by 20%. The company has a policy of maintaining an allowance for impairment equal to 60% of individually insignificant leases.

2017

a. Delay rentals were paid on the Sauer and Raupe leases.

b. Late in 2017, the company abandoned the Sauer lease and two of the individually insignificant leases, which cost a total of $8,000 when acquired. The Raupe lease is now considered to be a very valuable lease, because a large producer was found on adjacent property.

c. At year-end, the company still could not decide whether to complete or abandon the well on the Van Dolah lease, and both criteria for delaying classification of the well were no longer met.
Prepare journal entries for the Optimistic Oil Company's transactions.

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Roads, location, damages, etc. $ 18,000 G&G costs to locate the specific drillsite.. 2,000 Drillpipe.... 18,000 Conductor casing. 10,500 Wellhead equipment. 28,000 Contractor's charges and drilling fee (no equipment). 737,000 Equipment rentals. .. 30,000 Water, fuel, power, lubricants. 70,000 Drill bits... 19,000 Electric logging Cement.... Cementing services Casing crews. Surface casing. 20,000 20,000 15,000 40,000 32,600