Question #1 (14 marks) As an accountant, you are required to check the following accounting treatments and given calculations, if possible, of the following independent inquiries. Specifically, you are expected to COMMENT on whether the accounting treatment is correct or not and EXPLAIN why it is correct or wrong. Provide calculations whenever needed. A. National company incurred RO 1,500,000 on drilling a well on a proved area and reported this amount as a "drilling expenses" on its Income Statement. (3 marks) B. Star Company paid a total of RO 2,000 for delay rentals, RO 1350 delinquent property taxes, and RO 800 record-keeping costs in its first year of operations. None of the above costs are recoverable. The company's junior accountant recorded the above costs by debiting "Unproved Property Account" and crediting "Cash Account for RO 4,150. (5 marks) C. Moon Company has unproved property (lease A) with a cost of RO 60,000. It negotiated a new lease on Lease A one day after the end of the primary term. The company paid RO 75,000 and recorded unproved property for RO 135,000. (3 marks) D. Company C purchased land in fee. The purchase price of the land was RO 112,000 and the purchase price of the mineral rights was RO 48,000. The estimated fair market values of the land and mineral rights are RO 240,000. The estimated fair value of the mineral rights is RO 76,000 as calculated by the company's accountant. (3 marks) Question #1 (14 marks) As an accountant, you are required to check the following accounting treatments and given calculations, if possible, of the following independent inquiries. Specifically, you are expected to COMMENT on whether the accounting treatment is correct or not and EXPLAIN why it is correct or wrong. Provide calculations whenever needed. A. National company incurred RO 1,500,000 on drilling a well on a proved area and reported this amount as a "drilling expenses" on its Income Statement. (3 marks) B. Star Company paid a total of RO 2,000 for delay rentals, RO 1350 delinquent property taxes, and RO 800 record-keeping costs in its first year of operations. None of the above costs are recoverable. The company's junior accountant recorded the above costs by debiting "Unproved Property Account" and crediting "Cash Account for RO 4,150. (5 marks) C. Moon Company has unproved property (lease A) with a cost of RO 60,000. It negotiated a new lease on Lease A one day after the end of the primary term. The company paid RO 75,000 and recorded unproved property for RO 135,000. (3 marks) D. Company C purchased land in fee. The purchase price of the land was RO 112,000 and the purchase price of the mineral rights was RO 48,000. The estimated fair market values of the land and mineral rights are RO 240,000. The estimated fair value of the mineral rights is RO 76,000 as calculated by the company's accountant
