During 2013 oil company engaged in 86 different exploratory projects only 20 successful costs was 24 million 5.6 million was associated withe success end of 2013 production not started. Using success method how much would be shown on income statement 2013? How much will be capitalized and shown as an asset on balance sheet? Same for the full cost method. How do I figure this out?
Successful efforts explanation:
Using the success method, the oil company would capitalize the expenses that were associated with their successful efforts. In this case, $5.6 million were associated with successful efforts, and would be shown as a long-term asset on the oil company's balance sheet. Using the success method, the remaining costs would be treated as expenses, so 24 - 5.6 = 18,400,000 would be expensed on the income statement (exploration expense), and 5,600,000 would be a capital asset, and therefore not reported on the income statement. This allows the ...
The solution provides a detailed explanation to determine how much would be used for full cost accounting methods and how much would be used under the successful method of accounting.