n 2018, oil is discovered at Black, while Blue is abandoned. Grey has not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active significant operations in the area are continuing. The acquisition costs relate to intangible assets and the exploration costs elate to tangible assets (to be written off on a production basis). The production commences at Black at the beginning of 2019. Black is estimated to have 25 million barrels. Current sale price is $65 per barrel. Five million barrels are extracted at a production cost of $15 million, and 3 million barrels are sold in 2019. Required Provide the journal entries (excluding narrations) for 2017, 2018 and 2019 using the area of interest method.

n 2018, oil is discovered at Black, while Blue is abandoned. Grey has not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active significant operations in the area are continuing. The acquisition costs relate to intangible assets and the exploration costs elate to tangible assets (to be written off on a production basis). The production commences at Black at the beginning of 2019. Black is estimated to have 25 million barrels. Current sale price is $65 per barrel. Five million barrels are extracted at a production cost of $15 million, and 3 million barrels are sold in 2019. Required Provide the journal entries (excluding narrations) for 2017, 2018 and 2019 using the area of interest method.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 11P

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