Reference no: EM132618199

Question - Mines Ltd incurs the following exploration and evaluation costs at two sites, Gold and Silver, during 2019:

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 financial year, oil of an economically recoverable nature is discovered at Gold, but Silver is abandoned. Following the discovery of oil at Gold, roads and other infrastructure of a fixed nature are constructed in 2020 at a cost of $4 000 000.

Production at Gold begins in 2020 financial year. Gold site is estimated to have 2 000 barrels. The current sale price is $18 000 per barrel. During 2020, 1000 barrels are extracted at a total production cost of $1 500 000 and 150 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.