Question

Identify the accounts affected and by what amount. The company follows successful efforts method.

1. Landslide Energy incurred costs of $30,000 in preparing a drillsite.

2. The contractor was paid $400,000 on a day-rate contract (all intangible).

3. Equipment (casing) costs of $75,000 were incurred.

4. Costs of $70,000 were incurred in evaluating the well.

5. Landslide Energy decided to complete the well and incurred costs of $45,000 (perforating and fracturing), $60,000 (cementing), and $100,000 (equipment) in completing the well.

Answer 1

SOLUTION:

Particulars	Debit	Credit
Wells-in-progress – IDC	30,000
Cash		30,000
Wells-in-progress – IDC	400,000
Cash		400,000
Wells-in-progress – L&WE	75,000
Cash		75,000
Wells-in-progress – IDC	70,000
Cash		70,000
Wells-in-progress – IDC (4,000 + 60,000)	105,000
Wells-in-progress – L&WE	100,000
Cash		205,000
Wells and Equipment – IDC	605,000
Wells and Equipment – L&WE	175,000
Wells-in-progress – IDC		605,000
Wells-in-progress – L&WE		175,000