Question

Marx Oil Company acquired the exploration rights on 20,000 acres at $4/acre and then hired an independent geological firm to conduct the initial G&G work for $83,000. As a result of the G&G work, Marx Company decided to lease 600 acres (ignore acquisition costs). Marx then hired the same geological firm to perform detailed G&G studies on the 600 acres at a cost of $100,000. REQUIRED: Give the entries to record these transactions.

Answer 1

Below is the table showing Journal Entries: -

А 1 Sr. No. 1 2 B C D Account Titles and Explanation Debit Credit G&G expense - Shooting rights (20000*4) 80,000 Cash 80,000 (to record acquisition of exploration rights @4 per acres) G&G expense - G&G studies 83,000 Cash 83,000 (to record payment made for initial G&G work) G&G expense - G&G studies 100,000 Cash 100,000 (to record cost of performing detailed G&G studies) 3