The Jones Oil Company started its oil and gas exploration and production business in 2005. During the year 2005 and 2006, the company provided the following information relating to leases located both in the U.S. and in Canada:

a. Record the above information for both years. Ignore revenue entries.

b. Compute and record DD&A for both years. Assume the revenue method may be ignored in the second year. If there is not a significant difference between the revenue basis and energy basis in the first year (less than \($150,000),\) use the energy basis (equivalent Mcf ). Assume that all possible costs are included in DD&A.

c. Compute DD&A using a common unit of measure based on Mcf assuming Jones Oil Company used SE accounting instead of FC accounting.

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Year Lease A (U.S.) Lease B (U.S.) Lease C (Canada) 2005 Leasehold costs $ 40,000 $ 30,000 Well Number Well 1 Well 1 IDC 300,000 500,000 L&WE 0 350,000 Results Well dry, Proved abandon well