Question 4 Clark Oil Ltd has explored two different areas: Batchewana and Searchmont. At these two areas, it incurred the following Exploration and Evaluation expenditures during 2018 (70% of these expenditures relate to property, plant and equipment and 30% relate to intangible assets): Year 2018 Batchewana $300,000 Searchmont $150,000 In 2019, oil was discovered at the Batchewana site and development costs of $30,000 were incurred at the site (this comprised of fixed infrastructure that was constructed in 2019). However, the Searchmont site was abandoned in 2019 due to concerns over its environmental impact. Production at the Batchewana site started at the beginning of 2020. It is estimated that the amount of oil at this site is 30,000 barrels. During 2020, Clark Oil Ltd extracted 9,000 barrels at the site at a production cost of $36,000 and sold 6,000 barrels. The sales price is $24 per barrel. At the midway point of 2020, Clark Oil Ltd purchased a portable building for $48,000 in cash that is temporarily placed at the Batchewana site. Clark Oil Ltd depreciates/amortises these assets on a production basis, except for the portable building which is depreciated over its estimated useful life of 3 years. Required: (a) Using the area-of-interest method, provide the journal entries required for the years ending 2018, 2019, and 2020 to conform with the following accounting standards: AASB 6 Exploration for and Evaluation of Mineral Resources; AASB 116 Property, Plant and Equipment; AASB 102 Inventories; AASB 138 Intangible Assets. (b) With reference to Positive Accounting Theory (PAT), discuss which method of accounting for exploration and evaluation costs a manager may be expected to select. Explain how this may (or may not) conflict with the AASB Conceptual Framework for Financial Reporting. (12+ 8 = 20 marks)