Sky Petroleum owned the following unproved property at 12/31/26: Significant Leases Cost Impairment Insignificant Leases Cost Total
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Question:
Sky Petroleum owned the following unproved property at 12/31/26:
Significant Leases | Cost | Impairment | Insignificant Leases | Cost | Total Impairment |
Lease A | $330,000 | $120,000 | Lease C | $40,000 | |
Lease B | $470,000 | $140,000 | Lease D | $30,000 | |
Lease E | $25,000 | ||||
Lease F | $15,000 | ||||
$110,000 | $44,000 |
Requirement:
Prepare journal entries for 2027, assuming the following events:
a. Lease A was fully impaired.
b. Lease B was sold for $450,000.
c. Proved reserves were found on Lease D and Lease F.
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