Halen Oil Company adopts the full cost accounting. The company acquired shooting rights to 1,000 acres...
Halen Oil Company adopts the full cost accounting. The company acquired shooting rights to 1,000 acres (Lease A), paying $15,000. The company should have the journal entries as:
A. G&G costs – nondirect 15,000 Cash 15,000
B. Unproved property – Lease A 15,000 Cash 15,000
C. Unproved property - Delay rental 15,000 Cash 15,000
D. Wells-in-progress – L&WE 15,000 G&G costs – nondirect 15,000
Homework Answers
Answer: A
The lease has been taken by paying $15,000. Since this is an oil company, such cost becomes “geological and geophysical” (G&G); this account would be debited as non-direct and cash would be credited as it is spent.
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