The Manguino Oil Company incurred exploration costs in 2018 searching and drilling for oil as follows:
Well 101 ........................... $ 50,000
Well 102 ........................... 60,000
Well 103 ........................... 80,000
Wells 104-108 .................... 260,000
Total ................................ $450,000
It was determined that Wells 104-108 were dry holes and were abandoned. Wells 101, 102, and 103 were determined to have sufficient oil reserves to be commercially successful.
Required:
1. Prepare a summary journal entry to record the indicated costs assuming that the company uses the full-cost method of accounting for exploration costs. All of the exploration costs were paid in cash.
2. Prepare a summary journal entry to record the indicated costs assuming that the company uses the successful efforts method of accounting for exploration costs. All of the exploration costs were paid in cash.