In 2013, Lawrence Company spends $4 million drilling oil wells. Sixty percent of the drilling is successful

Question:

In 2013, Lawrence Company spends $4 million drilling oil wells. Sixty percent of the drilling is successful and results in commercial quantities of oil being found.

Required:

1. How much drilling expense should the company recognize under:

a. successful-efforts method

b. full-cost method

2. At what value should the company report the asset, Oil and Gas Properties, on its balance sheet under:

a. successful-efforts method

b. full-cost method

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...