On December 31, 2018, the account for Drake Oil Companys individually insignificant unproved properties had a balance
Question:
On December 31, 2018, the account for Drake Oil Company’s individually insignificant unproved properties had a balance of $800,000. The impairment allowance account had a balance of $75,000.
REQUIRED: Give the entries for each of the following transactions occurring in 2018, 2019, and 2020. (All transactions concern individually insignificant unproved leases.)
a. Assuming Drake has a policy of maintaining a 55% allowance, i.e., 55% of gross unproved properties, give the entry to record impairment on December 31, 2018.
b. During 2019, Drake surrendered leases that cost $300,000.
c. During 2019, leases that cost $50,000 were proved.
d. During 2019, leases costing $310,000 were acquired.
e. Give the entry to record impairment on December 31, 2019.
f. During 2018, leases costing $428,000 were surrendered.
Step by Step Answer: