Garvin Oil Company incurred the following costs during the yea 2018 2018 and 2019 eys during the year. a. Contracted and paid S50,000 for G&G surv b. Leased acreage in four areas as follows: O/acre bonus; other acquisition costs, $2,000 other a s@ $100/acre bonus; other acquisition costs 1) Marrow lease 500 acres 2) Richards lease-800 acre $3,000 3) Onyx lease 200 acres @ $60/acre bonus; other acquisition costs, S500 4) Raupe lease-600 acres@ $30/acre bonus; other acquisition costs, $800 Each lease had a delay rental clause requiring payment of S10 per acre if drilling was not commenced by the end of one year. Also, each of the above leases was considered individually significant c. The company also leased 10 individual tracts for a total consideration of $60,000. The tracts are considered to be individually insignificant and are the first individually insignificant unproved properties acquired by Garvin d. The company incurred $1,000 in costs to maintain lease and land records in 2018 e. During 2018, the company incurred the following costs in connection with the Maxwell lease when drilling an exploratory well: G&G costs to locate the specific drillsite . . . . . . . . . . . . . . . .. . 2,000 28,000 737,000 30,000 Contractor's charges and drilling fee (no equipment). . . . . . . . Electric logging. . 20,000 .. Cementing services . .. Surface casing. 32,600 . Completion costs in connection with the above well were as follows: Production casing 22,000 37,500 20,000 1,000 40,000 45,000 8,000 Labor for installing Christmas tree . . . . . . . . . . . . . . . . . . . . . . . Perforating. Labor for installing flow lines............. . . . . .. exploratory well was drilled on the Richards lease in 2018 on a turnkey sis to 9,000 feet. The contractor's charge was $300,000, which included $40,000 for casing. At the end of 2018, a decision had not been made to complete or abandon the well. Both criteria for maintaining the suspended well classification were met. At the end of 2018, the Raupe lease was impaired by 40%, and the Onyx lease by 20%. The company has a policy of maintaining an allowance for impairment equal to 60% of individually insignificant leases. a. Delay rentals were paid on the Onyx and Raupe leases. b. Late in 2019, the company abandoned the Onyx lease and two of the individually insignificant leases, which cost a total of $8,000 when acquired The Raupe lease is now considered to be a very valuable lease, because a large producer was found on adjacent property. c. At year-end, the company still could not decide whether to complete or abandon the well on the Richards lease, and both criteria for delaying classification of the well were no longer met. REQUIRED: Prepare journal entries for the above transactions
