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In 2018, Aggie Oil Corp. began operations exclusively in the United States, using the full cost method of accounting. Prepare journal entries, assuming the following
In 2018, Aggie Oil Corp. began operations exclusively in the United States, using the full cost method of accounting. | ||||
Prepare journal entries, assuming the following transactions in the first three years of operations. | ||||
(Please label information as you work through your problem, and perform all calculations IN the cells, cell referencing whenever possible.) | ||||
*Calculate DD&A twice: | 2018 | 2019 | 2020 | |
(1) Assuming no exclusions from the amortization base | Cell reference your final answer here | |||
(2) Assuming all possible exclusions from the amortization base | Cell reference your final answer here, | |||
then link either (1) or (2) to your journal entries but be consistent! | ||||
*Ignore the ceiling test for 2018, but apply it twice for 2019 and 2010: | ||||
(1) Assuming no exclusions from the amortization base | ||||
(2) Assuming all possible exclusions from the amortization base | ||||
You may combine lease information in entries in other words, your journal entries should follow a logical order of sequence as given in the problem (lease first, G&G studies, drill, plug or complete). | ||||
2018 (there will be 6 journal entries) | Lease A | Lease B | Lease C | |
Lease bonuses | $ 50,000 | $ 40,000 | $ 55,000 | |
G&G costs -- direct | 60,000 | 50,000 | 90,000 | |
Lease record maintenance | 2,000 | 5,000 | 1,000 | |
Legal costs for title defense | 15,000 | - | 10,000 | |
Drilling costs | Well 1, Exploratory | Well 1, Exploratory | ||
IDC | - | 300,000 | 150,000 | |
Equipment | - | 125,000 | 40,000 | |
Drilling results | None | Well dry | Drilling incomplete | |
2019 (there will be 9 journal entries be sure to specify which options above you are using to journalize) | ||||
Delay rental | $ 4,000 | $ - | $ - | |
Drilling costs | Well 1, Exploratory | Well 2, Exploratory | Well 1 | |
IDC | 275,000 | 225,000 | 60,000 | |
Equipment | 50,000 | 50,000 | 40,000 | |
Drillling results | Completed, successful | Drilling incomplete | Completed, successful | |
Found proved reserves (bbl) | 100,000 | 300,000 | ||
Installed flow lines, tanks, etc. | ||||
Installation costs | $ 5,000 | $ - | $ 3,000 | |
Purchase costs | 30,000 | - | 45,000 | |
Future development costs | 600,000 | - | 400,000 | |
Production during year (bbl) | 4,000 | - | 6,000 | |
FMV of Lease B | $ 200,000 | |||
PV of future net revenue as of 12/31/19 | $ 500,000 | $ 800,000 | ||
2020 (there will be 6 journal entries be sure to specify which options above you are using to journalize) | ||||
Drilling costs | Well 2, Developmental | Well 2 | Well 2, Developmental | |
IDC | $ 300,000 | $ 5,000 | $ 250,000 | |
Equipment | 80,000 | - | 100,000 | |
Drilling results | Dry | Dry, abandoned lease | Completed, successful | |
Found proved reserves (bbl) | 200,000 | |||
Future development costs | $ 200,000 | $ - | ||
Production during year (bbl) | 5,000 | - | 20,000 | |
FMV of Lease B | $ - | |||
PV of future net revenue as of 12/31/20 | $ 1,000,000 | $ 3,000,000 | ||
Journal entries: (be sure to label all of your work, perform all calculations IN the cells, and cell reference whenever possible) |
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