The Cross$-$Oil Corporation incurred the following costs and had the following other transactions for the years $2020$

and $2021.$ The company uses the Successful efforts method of accounting. Prepare journal entries for the Cross$-$Oil

Corporation$$s transactions for $2020$ and $2021$ and prepare a BALANCE SHEET STATEMENT using the Successful Effort

method of accounting for $2020$: $(30$pts$)$

$2020$

a$)$ Paid $$100,00$ for G&G costs during the year. $(2$pt$)$

b$)$ Leased acreage in three individually significant areas as follows $(2$pt$)$

$*$Jones lease $1,000$ acres @$$60$ per acre, and other acquisition costs of $$3,000$

$*$Batch lease $800$ acres @ a lease bonuses of $$70$ per acre, and other acquisition costs of $$10,000$

$*$Highland lease $600$ acres @ $$60$ per acre bonus, and other acquisition costs of $$8,000$

c$)$ The company also leased $20$ individual tracts for a total cost of $$80,000.$ These leases are considered to be

individually insignificant and are the first insignificant unproved properties acquired by Cross. $(2$pt$)$

d$)$ Paid $$5,000$ in costs to maintain lease and land records in $2020.$ Also paid $$30,000$ to successfully defend a

title suit concerning the Batch lease. $(2$pt$)$

e$)$ Paid the following costs in connection with Batch #$1,$ a successful exploratory well: $(6$pt$)$

G&G costs to locate a well site $$5,000$

Location and road preparation prior to spudding$-$in the well $$6,000$

Surface damages $$16,000$

Surface casing $$6,000$

Drilling contractor fee $($daywork rate$)$ $$200,000$

Equipment rentals $$100,000$

Drilling fluids $$40,000$

Fuel $$10,000$

Drill bits $$20,000$

Cementing services $$5,000$

Roustabout labor $$9,000$

Hauling & transportation $$8,000$

Production casing $$36,000$

Tank battery $$11,000$

Flow lines & connections $$5,000$

Pumping unit motor & accessories $$50,000$

Casing head & connections $$7,000$

Tubing $$13,000$

Separating and treating equipment $$12,000$

Measuring equipment $$1,000$

Downhole pump and rods $$4,000$

Testing and acidizing $$11,000$

f$)$ An exploratory well was drilled on the Highland lease in $2020$ on a turnkey basis to $8,000$ feet. The

contractor$$s charge of $$400,000$ was paid. The charge included $$60,000$ for casing. At the end of $2020,$ a

$5$

decision had not been made to complete or abandon the well. Both criteria for delaying classification of the

well were met. At the end of $2020,$ the Jones lease was impaired $60\%,$ and the Highland lease by $30\%.$ The

company$$s policy is to maintain an allowance for impairment at $70\%$ of the cost of insignificant leases. $(8$pt$)$

g$)$ Cross$-$Oil Corporation recorded $$150,000$ in Accumulated DD&A and recorded $$131,250$ in total DD&A

expenses for $2020.(2$pt$)($Information for preparation of a formal Balance Sheet$)$

$2021$

h$)$ Delay rentals of $$2,000$ were paid on the Jones lease, $$1,200$ on the Highland lease and $$3,000$ on

insignificant leases. $(2$pt$)$

i$)$ During $2021,$ the Jones lease was abandoned, and three of the individually insignificant leases $($cost $$8,000)$

were also abandoned. $(2$pt$)$

j$)$ At year$-$end $(2021),$ the company decided to abandon the Highland well. It was determined to be a dry hole

$($No Proved Reserves$).(2$pt$)$