QUESTION 3 12 MARKS

Excavator Ltd incurs the following exploration and evaluation costs at the following two sites:

Year	Site A	Site B
	($ M)	($M)
2019	120	200

In relation to the above expenditures, 50 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment.

At the end of 2019, oil of an economically recoverable nature is discovered at Site A, but Site B is abandoned.

Production begins in 2020. Site A is estimated to have 2,000 barrels. The current sale price is $2 M per barrel. During 2020, 200 barrels are extracted at a total production cost of $6 M and 100 barrels are sold.

REQUIRED

Provide the journal entries for 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production-output method. Exclude journal narrations.