Basic Oil Company conducted G&G activities on leases owned by Artificial Oil Company and Universal Oil Company. Each agreement provides for Basic Oil Company to receive 1/4 of each WI if proved reserves are found and to be reimbursed if proved reserves are not found. Basic Oil Company incurred the following G&G costs on Artificial’s and Universal’s leases:

The well drilled on the Artificial Oil lease was successful, and 1/4 of the WI was assigned.
Drilling on the Universal lease resulted in a dry hole, and Basic was reimbursed for the G&G costs incurred. Prepare entries for the above transactions.

Transcribed Image Text:

Artificial Universal $50,000 $40,000