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Rhine Minerals Ltd has exploration licenses for the areas of interest of Forest and Twiggy. Exploration and evaluation costs of $7,500,000 were incurred at Site Forest and exploration and evaluation costs of $6,000,000 were incurred at Site Twiggy during the year ended 31 December 2019. In relation to the above exploration and evaluation expenditure, 40 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. At the beginning of 2020, oil of an economically recoverable nature is discovered at Site Forest, but Site Twiggy is abandoned. Production at Forest begins in 2020. Site Forest site is estimated to have 2 000 barrels. The current sale price is $21,000 per barrel. During 2020, 500 barrels are extracted at a production cost of $1,000,000 and 100 barrels are sold. REQUIRED Provide the journal entries for 2018, 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production- output method. Exclude journal narrations,

Rhine Minerals Ltd has exploration licenses for the areas of interest of Forest and Twiggy. Exploration and evaluation costs of $7,500,000 were incurred at Site Forest and exploration and evaluation costs of $6,000,000 were incurred at Site Twiggy during the year ended 31 December 2019. In relation to the above exploration and evaluation expenditure, 40 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. At the beginning of 2020, oil of an economically recoverable nature is discovered at Site Forest, but Site Twiggy is abandoned. Production at Forest begins in 2020. Site Forest site is estimated to have 2 000 barrels. The current sale price is $21,000 per barrel. During 2020, 500 barrels are extracted at a production cost of $1,000,000 and 100 barrels are sold. REQUIRED Provide the journal entries for 2018, 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production- output method. Exclude journal narrations,

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Rhine Minerals Ltd has exploration licenses for the areas of interest of Forest and Twiggy. Exploration and evaluation costs of $7,500,000 were incurred at Site Forest and exploration and evaluation costs of $6,000,000 were incurred at Site Twiggy during the year ended 31 December 2019. In relation to the above exploration and evaluation expenditure, 40 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. abandoned. At the beginning of 2020, oil of an economically recoverable nature is discovered at Site Forest, but Site Twiggy Production at Forest begins in 2020. Site Forest site is estimated to have 2 000 barrels. The current sale price is $21,000 per barrel. During 2020, 500 barrels are extracted at a production cost of $1,000,000 and 100 barrels are sold, REQUIRED Provide the journal entries for 2018, 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production- output method. Exclude journal narrations.
Transcribed Image Text:Rhine Minerals Ltd has exploration licenses for the areas of interest of Forest and Twiggy. Exploration and evaluation costs of $7,500,000 were incurred at Site Forest and exploration and evaluation costs of $6,000,000 were incurred at Site Twiggy during the year ended 31 December 2019. In relation to the above exploration and evaluation expenditure, 40 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. abandoned. At the beginning of 2020, oil of an economically recoverable nature is discovered at Site Forest, but Site Twiggy Production at Forest begins in 2020. Site Forest site is estimated to have 2 000 barrels. The current sale price is $21,000 per barrel. During 2020, 500 barrels are extracted at a production cost of $1,000,000 and 100 barrels are sold, REQUIRED Provide the journal entries for 2018, 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production- output method. Exclude journal narrations.
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