2. Hard Luck Oil Company agreed to conduct G&G studies and other exploration activitieson a Lease owned by Falcon Oil Company in exchange for an interest in the property ifproved reserves are found. If proved reserves are not found, Hard Luck will bereimbursed for the costs incurred. Both Hard Luck and Falcon use The Successfulefforts method of accounting.
-Hard Luck incurs $200,000 of Exploration costs.-Assume Reserves are found.-Assume instead that reserves are not found.Give any entries required for Hard Luck.