I was wondering if you can help me with oil and Gas Accounting problem. I need to explain it to my brother.

Find bellow the problem I request:

An oil and gas company has set up a Cyprus subsidiary by investing 200m in its share capital. The company agreed with the government of Cyprus to explore four sea areas for oil and gas reserves. For the purpose during the period 1 April 2016 to 31 December 2016 the company has made the following transactions:

1.Introduced capital of 400m investing 400m in cash.

2.Acquired the rights for exploratory work paying to the government the following as exploratory rights fees:

Area Number

Rights Paid (m)

#1

16

#2

8

#3

8

#4

4

3.Legal fees were paid cash at the rate of 3% on exploratory fees.

4.For the areas #2 and #3 G&G information was acquired from an Italian company for 600,000 and 200,000 all paid cash respectively.

5.For area #1 G&G information was purchased from an American company paying 400,000cash.

6.For the purpose of carrying out the exploratory work the company has used three platforms as follows:

Area #

Details

#1

An own platform purchased for 170m expected to be used for 8 years at the end of which its expected residual value is estimated to be 10m.

#2 & #3

An own platform cost 100m depreciated at a 10% rate per year (on a straight line method basis).

#4

A rented platform at a monthly rental rate of 2m.

7.Operating costs for the period 1 April to 31 December 2016 were paid cash as follows:

Area Number

Operating Costs (m)

#1

30

#2

20

#3

20

#4

10

8.Payroll cost for the period per platform was paid cash as follows:

Area Number

Operating Costs (m)

#1

10

#2

4

#3

4

#4

2

9.General administration expenses for the 9 month period were 20m charged to each operation on the basis of the fees paid to acquire rights for each area.

10.On 10 January 2017 the company announced its results from each single well made in each area with the results shown as follows:

Area Number

Result

#1

Successful

#2

Successful

#3

Successful

#4

Successful

Required:

a)Open all the relevant accounts and make the appropriate entries

b)Balance all the accounts and transfer the balances to the Trial Balance

c)Close the Trial Balance and transfer the balances to the P&L and the Balance Sheet.