Gem Limited commences operations on 1 January 2019. During 2019 Gem Limited explores three areas and incurs the following costs:

Exploration and Evaluation expenditure ($)

Desirable 25,000,000

Undesirable 20,000,000

Neutral 28,000,000

In 2020 oil is discovered at Desirable Site. Undesirable Site is abandoned. Neutral Site has not yet reach a stage that permits a reasonable assessment at the existence or otherwise of economically recoverable reserves, and active and significant operations in the area of interest are continuing. In relation to the exploration and evaluation expenditures incurred at Desirable Site and Neutral Site, 70 percent of the expenditures related to property, plant and equipment, and the balance relates to intangible assets.

In 2020, development costs of $48,000,000 are incurred at Desirable Site (to be written off on a production basis). $32,000,000 of this expenditure relates to property, plant and equipment, and the balance relates to intangible assets. The development of Desirable Site is completed but the production is not started yet. (i.e. there is no production, inventory and sales)

Required:

Provide the necessary journal entries using the area-of-interest method

NOTE:

1. Examine conceptual issues and the sources of authority for the accounting requirements which apply to reporting by Australian companies, including Company Law, International and Australian Accounting Standards, and Stock Exchange requirements; 2. Understand and evaluate different theories of accounting such as positive accounting theory, normative accounting theory, stakeholders' theory, legitimacy theory, institutional theory, and different initiatives of relevant global organisations such as GRI, IR; 3. Apply Australian Accounting Standards and Corporate Legislation to the financial reporting processes; 4. Evaluate advanced level financial accounting problems and select appropriate accounting strategies for the accounting entity; 5. Understand different provisions of accounting standards and the compliance requirements of the professional and legal bodies in Australia; 6. Make judgments about appropriate use of accounting standards and accurately apply appropriate treatments for different advanced level accounting issues;