Duncan Oil Company has capitalized costs on Lease R, Lease S, and Lease T as of 12/31/2003 as follows:

Duncan has no other capitalized costs. The leases are located in different counties in Texas.

REQUIRED: 

If necessary, test the assets for impairment and make any necessary journal entries assuming production costs tripled late in the year on all three leases and that production costs are not expected to decrease.

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Lease S Lease T $600,000 $400,000 200,000 630,000 380,000 160,000 540,000 320,000 Net capitalized cost Expected undiscounted future net cash flows Fair value (discounted future net cash flows) Lease R $300,000