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    WEEK 8 - Acc

    Uploaded by

    Yusef Shaqeel
    The document discusses expenditures for three different sites - neutral, undesirable, and desirable. For the neutral site, $28 million in evaluation and exploration costs were carried forward to 2020. For the undesirable site, $20 million in costs were written off in 2019. For the desirable site, $25 million in costs were carried forward to 2020, and $48 million in development costs incurred in 2020 were expensed based on production levels.

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    WEEK 8 - Acc

    Uploaded by

    Yusef Shaqeel
    18 views2 pages
    The document discusses expenditures for three different sites - neutral, undesirable, and desirable. For the neutral site, $28 million in evaluation and exploration costs were carried forward to 2020. For the undesirable site, $20 million in costs were written off in 2019. For the desirable site, $25 million in costs were carried forward to 2020, and $48 million in development costs incurred in 2020 were expensed based on production levels.

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    WEEK 8_Acc

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    The document discusses expenditures for three different sites - neutral, undesirable, and desirable. For the neutral site, $28 million in evaluation and exploration costs were carried forward to 2020. For the undesirable site, $20 million in costs were written off in 2019. For the desirable site, $25 million in costs were carried forward to 2020, and $48 million in development costs incurred in 2020 were expensed based on production levels.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    18 views2 pages

    WEEK 8 - Acc

    Uploaded by

    Yusef Shaqeel
    The document discusses expenditures for three different sites - neutral, undesirable, and desirable. For the neutral site, $28 million in evaluation and exploration costs were carried forward to 2020. For the undesirable site, $20 million in costs were written off in 2019. For the desirable site, $25 million in costs were carried forward to 2020, and $48 million in development costs incurred in 2020 were expensed based on production levels.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    “WEEK 8”

    Neutral Site

    The expenditure of 28,000,000 dollars associated with evaluation and exploration is

    required to be C/F (carry forward) to 2020, which is the next year based upon the given

    proportion (seventy-percent of PPE and the remaining amount is related to the company’s

    intangible assets. This is because the site that is neutral has still on the stage, which gives

    permission to a reasonable evaluation in the initial period, and also the main and active

    operations in the interest area are still ongoing. Therefore, the following entry is needed to be

    mentioned:

    Debit: PPE 19,600,000 dollars

    Assets (intangible) 8,400,000 dollars

    Credit: Bank 28,000,000 dollars

    Undesirable Site

    The expenditure of 20,000,000 dollars associated with evaluation and exploration are

    required to be written off in the year 2019 according to the method named interest area. The

    reason is that the site has no more restrictions. Therefore, the following entry must be passed:

    Debit: Account of Expense 20,000,000 dollars

    Credit: Bank 20,000,000 dollars

    Desirable Site
    The cost connected to evaluation and exploration is 25,000,000 dollars, which is needed

    to be C/F to the coming year (2020) on the same basis as mentioned in the neutral site. This is

    required because the discovery of oil took place in the year 2020 at this site. The following entry

    will be posted:

    Debit: PPE 17,500,000 dollars

    Assets (intangible) 7,500,000 dollars

    Credit: Bank 25,000,000 dollars

    Also, the cost of development amounting to 48,000,000 dollars incurred in 2020 at this

    site, which is needed to be written off on the basis of production. Most of the amount related to

    this expense is associated with PPE and the remaining relates to the assets that are intangible.

    Another journal entry is required to be recorded in the general journal, which is given below:

    Debit: PPE 32,000,000 dollars

    Assets (intangible) 16,000,000 dollars

    Credit: Bank 48,000,000 dollars

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