The Libby Oil Corporation incurs unproved property (Lease A) costs of $60,000 on April 1, 2018. An
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The Libby Oil Corporation incurs unproved property (Lease A) costs of $60,000 on April 1, 2018. An 8% loan is obtained on April 1, 2018 for $500,000 to finance a drilling program. Libby started a well on Lease A on June 1, 2018, and the well is still in progress at 12/31/18. Drilling costs to 12/31/18 are $300,000. The company excludes all possible costs from the cost pool.
REQUIRED: Compute the interest capitalization amount and record the interest.
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