Payne Oil Co. began operations during 2019. The following information is as of 12/31/19 and early 2020.
(Expense lifting costs as lease operating expense. Combine lease information for entries marked with *.)
Transactions for 2019:	Lease A	Lease B	Lease C
*a. Acquisition costs of undeveloped leases (1/8 RI)	$ 60,000	$ 30,000	$ 40,000
*b. G&G costs	60,000	50,000	90,000
*c Drilling costs	200,000	230,000	250,000
d. Drilling results (as of 12/31/19):	Drilling completed	Drilling completed, dry	Drilling not completed
Proved reserves	700,000	bbl
Proved developed reserves	300,000	bbl
e. Production	10,000	bbl
f. Lifting costs	$ 250,000
g. December 31	Record DD&A, Lease A	Lease B impaired
		40%
Transactions for 2020:
h. Assume on January 2 of the second year (2020) that disaster struck both Lease A and Lease B.
Lease A and Lease B were abandoned.
Equipment salvaged from Lease A	$ 15,000
(Assume this is NOT a post-balance sheet event, and has no affect on statements of previous years.)
(1) Prepare ALL journal entries, clearly labeling any calculations necessary for the journal entries.
Perform ALL calculations IN the cells, and use cell referencing whenever possible.
(HINT: There are a total of 10 journal entries in 2019, and 2 journal entries in 2020.)
(2) Prepare an income statement for Payne Oil Co. for the year ending 2019,
assuming revenue from oil sales if	$ 1,200,000
(HINT: Net Income is $500,703)

Answer rating: 100% (QA)

1 Journal Entries for 2019 a Acquisition costs of undeveloped leases 18 RI Lease A Debit Land and Mineral Rights 60000 Credit Cash 60000 Lease B Debit ... View the full answer