Question
Garvin Corporation incurred the following costs during calendar year 2019 in connection with Raupe Lease: -Acquired the 600-acres Raupe lease at a lease bonus of
Garvin Corporation incurred the following costs during calendar year 2019 in connection with Raupe Lease:
-Acquired the 600-acres Raupe lease at a lease bonus of $70/acre and other acquisition costs of $15,000.
-In addition to the above costs, the Company Incurred the following costs in connection with Raupe:
G&G costs to locate wellsite....$10,000
Surface damages.. ..40,000
Surface casing.20,000
Contractors fee-day rate... 350,000
Equipment rentals 400,000
Drilling fluids 70,000
Fuel.18,000
Drill bits 40,000
Cementing services..10,000
Casing crews.12,000
Roustabout labor..16,000
Hauiling and transportation..15,000
Production casing.72,000
Tank battery.22,000
Lines and connections..11,000
Pumping unit motor and accessories..100,000
Casinghead and connections13,000
Tubing..17,000
Separating and treating equipment14,200
Measuring equipment.600
Downhole pump and rods.11,200
Required:
a. Classify the costs in b into IDC and L&WE.
b. Record the above transaction assuming that the well was successful.
c. Record the above transaction assuming that the well was dry if the Company paid cost of $70,000 to plug and abandoned the hole.
Hint: to save your time, you can record the IDC and L&WE in total not for each cost.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started