The Bass Strait Oil Company Limited incurs the following exploration and evaluation costs at two sites. Area A and Area B, over the years indicated: Year Area A (millions) Area B (millions) 2021 $10.0 $11.0 2022 $11.0 $13.0 2023 $13.0 $15.0 In relation to the above expenditure, in each year 20 percent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. At the end of 2023, oil of an economically recoverable nature is discovered at Area A but Area B is abandoned. In 2024, following the discovery of oil at Area A, roads and other infrastructure are constructed at a cost of $2 million. Portable buildings at a cost of $0.50 million are also put in place. After the above constructions, Area A commences operation. It is assumed that the entity adopts the cost model and does not perform revaluations. Required Provide the necessary journal entries for the years ending 2021, 2022, 2023 and 2024 using the area-of- interest method
The Bass Strait Oil Company Limited incurs the following exploration and evaluation costs at two sites. Area A and Area B, over the years indicated:
|
Year |
Area A (millions) |
Area B (millions) |
|
2021 |
$10.0 |
$11.0 |
|
2022 |
$11.0 |
$13.0 |
|
2023 |
$13.0 |
$15.0 |
In relation to the above expenditure, in each year 20 percent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. At the end of 2023, oil of an economically recoverable nature is discovered at Area A but Area B is abandoned.
In 2024, following the discovery of oil at Area A, roads and other infrastructure are constructed at a cost of $2 million. Portable buildings at a cost of $0.50 million are also put in place. After the above constructions, Area A commences operation.
It is assumed that the entity adopts the cost model and does not perform revaluations.
Required
- Provide the necessary
journal entries for the years ending 2021, 2022, 2023 and 2024 using the area-of- interest method.
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