Reference no: EM132618218

Question - Doyle Mining Ltd explores two sites, Arthur and Conan, during 2019 and incurs exploration and evaluation costs of $8 000 000 at Site Arthur and $6 500 000 at Site Conan

In relation to the above expenditure, 30 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment.

At the end of 2019, oil of an economically recoverable nature is discovered at Site Arthur, but Site Conan is abandoned. Following the discovery of oil at Site Arthur, roads and other infrastructure of a fixed nature are constructed in 2020 at a cost of $3 000 000.

Production at Site Arthur begins in 2020 and it is estimated to have 2 500 barrels. The current sale price is $15 000 per barrel. During 2020, 1,000 barrels are extracted at a total production cost of $2 000 000 and 200 barrels are sold.

REQUIRED - Provide the journal entries for 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production-output method. Exclude journal narrations.