QUESTION I

AGAMA oil limited was incorporated with authorized share capital of N2 billion with a nominal value of N100 of which 6000, 000 shares were issue at N120 and fully paid. The company is engaged in oil prospecting investment in the off-shore coast of Agenebode State of llumojaku. During the first year of operations, the following activities took place:

(1) Exploration and development Cost:

AREA 1. Ngn850000

AREA 11. Ngn900000

AREA 111. Ngn600000

AREA IV. Ngn5500000

(II)By the end of the first year:

AREA 1 was fully explored and yielded 520,000 barrels .

AREA 11 was fully explored and yielded 2640,000 barrels out of which 1452,000 barrels were extracted.

AREA 111-exploration was abandoned because it resulted into dry hole .

AREA- IV-exploration has reached an advanced stage but the quantity of resources was yet to established.

(Iii) Average production cost in each area of production was estimated at N30 per barrel

(IV) The company was under obligation to sell its oil at N500 per barrel and the company believes that its selling price of crude oil and production cost will not change adversely in the nearest future. (v) The company paid N300, 000,000 for the operating license (OPL) and it is the normal practice to amortize license cost over ten years.

(vi) The company acquired eight vehicles at a cost of N150, 000,000 on credit from Gertrude Motors and payment for these vehicles was differed until the next accounting year (vi) Petroleum profit tax for the period should be assumed to be 60% and payable on preceding year basis. Required

(a) Prepare the income statement and the statement of financial position for the first year of operation using full cost and successful efforts methods (b) Prepare the cash book of the company. Show full working where necessary