Q1-Use Successful Effort Method

a. Jensen Oil and Gas (Jensen) is interested in exploring an area near Bakersfield, California. Jensen accounts for its costs using the successful efforts method. It engages an aerial surveying firm to take photos of the region at a cost of $15,000. This results in the following entry?

Description Account Type Debit Credit

b. Jensen then acquires a least to a 640-acre property, which calls for an up-front bonus payment of $70 per acre. The related journal entry is?

Description Account Type Debit Credit

c. Jensen then hires a drilling company to drill an exploratory well for $650,000. The related journal entry is:

Description Account Type Debit Credit

d. After the well has been evaluated, it is determined to be a dry hole. The related journal entry is?

Description Account Type Debit Credit

e. Following this setback, Jensen instructs the drilling company to drill another exploratory well for $875,000, which is immediately determined to be successful. The resulting journal entry is?

Description Account Type Debit Credit

f. As the well was deemed successful, the resulting entry of the unproven property is?

Description Account Type Debit Credit

g. Pleased with the results, Jensen decides to fully develop the property. Jensen engages the drilling company to drill a development well at a cost of $1,200,000. The related journal entry is?

Description Account Type Debit Credit

h. After an evaluation period, the development well is designated a dry hole. The resulting entry is?

Description Account Type Debit Credit

i. Jensen drills two more wells that prove to be successful. After drilling two successful wells, Jensen spends $450,000 on flow lines, separators, tubing and other production facilities, the resulting journal entry is?

Description Account Type Debit Credit

j. Productions begin and Jensen incurs monthly production costs of $65,000. The resulting journal entry is?

Description Account Type Debit Credit