Question (10 marks) mences operations on 1 January 2017. During 2017, Fraser Island Burney Island Ltd commences operations explores two areas and incurs the following costs Area Exploration and Evaluation Expenditure (m) Alfa Bora Total it is discovered at Site Bora. Site Alfa is abandoned owing to the failure to Other information . In 2018 oil is discovered at prove the existence of economically recover recognised in relation to Site Alfa. Of the to tangible assets and $3 million relates to in existence of economically recoverable resources, and an impairment loss is to relation to Site Alfa. Of the 58 million incurred at Site Bora, $5 million relates sets and $3 million relates to intangible assets. At Site Alfa, $12 million of d to tangible assets and $5 million related to intangible assets the expenditure related to tangible assets and $5 million related Development costs of $20 million are incurred at Site Bora (to be written off on a hasis) in 2018. The development costs include $12 million in property, plant nt and $8 million in intangibles. This expenditure will be production basis) in 2018. The develo and equipment and $8 million in intangit depreciated/amortised on a production basis. ment at Site Bora concludes at the beginning of 2018, and production also commences at Site Bora at the start of 2019. It is estimated that the amount of oil at Site Bora is 8 million barrels. The current salt price is $30 per barrel. In 2019, Burney Island Ltd extracts 1.2 million barrels at a production cost of $3 million and sells 1.1 million barrels. EQUIRED vide the necessary journal entries using the area-of-interest method. Question (10 marks) mences operations on 1 January 2017. During 2017, Fraser Island Burney Island Ltd commences operations explores two areas and incurs the following costs Area Exploration and Evaluation Expenditure (m) Alfa Bora Total it is discovered at Site Bora. Site Alfa is abandoned owing to the failure to Other information . In 2018 oil is discovered at prove the existence of economically recover recognised in relation to Site Alfa. Of the to tangible assets and $3 million relates to in existence of economically recoverable resources, and an impairment loss is to relation to Site Alfa. Of the 58 million incurred at Site Bora, $5 million relates sets and $3 million relates to intangible assets. At Site Alfa, $12 million of d to tangible assets and $5 million related to intangible assets the expenditure related to tangible assets and $5 million related Development costs of $20 million are incurred at Site Bora (to be written off on a hasis) in 2018. The development costs include $12 million in property, plant nt and $8 million in intangibles. This expenditure will be production basis) in 2018. The develo and equipment and $8 million in intangit depreciated/amortised on a production basis. ment at Site Bora concludes at the beginning of 2018, and production also commences at Site Bora at the start of 2019. It is estimated that the amount of oil at Site Bora is 8 million barrels. The current salt price is $30 per barrel. In 2019, Burney Island Ltd extracts 1.2 million barrels at a production cost of $3 million and sells 1.1 million barrels. EQUIRED vide the necessary journal entries using the area-of-interest method
