Aggie Oil Company purchased three unproved leases as follows: July 1, 2012 Lease
ID: 2394542 • Letter: A
Question
Aggie Oil Company purchased three unproved leases as follows:
July 1, 2012 Lease A $300,000
August 15, 2012 Lease B 200,000
October 10, 2012 Lease C 400,000
In 2013, Lease A is determined to have a value of $130,000. In 2014, Lease A is abandoned.
In 2013, Lease B had a value of $150,000. In 2014, Lease B was determined to be proved.
Determine the entries that should be booked for these properties in 2014. To answer the questions below use D for debit and C for credit followed by the dollar amount. For example, D3000 (no commas or spaces).
Lease A entry:
Impairment or abandonment of unproved properties
Allowance for impairment of unproved properties
Unproved property acquisition cost
Lease B entry:
Proved property acquisition cost
Allowance for impairment of unproved properties
Unproved property acquisition cost
Explanation / Answer
Year -2013
For detailed understanding, i am giving 2013 entries also.
Lease A entry:
Lease impairment expense D170,000
Allowance for impairment of unproved properties C170,000
Lease B entry:
lease impairment expenses D50,000
Allowance for impairment of unproved properties C50,000
Year- 2014
Lease A entry:
Impairment or abandonment of unproved properties D130,000
Allowance for impairment of unproved properties D170,000
Unproved property acquisition cost C300,000
Leas B entry:
Proved property acquisition cost D150,000
Allowance for impairment of unproved properties D50,000
Unproved property acquisition cost C200,000
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