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Question - Recording Entries Using the Full-Cost and Successful-Efforts Methods - In 2020, Star Oil Co. incurred exploration costs related to exploring and drilling for oil. Costs were allocated to 5 drilling areas: Area 1: $50,000, Area 2: $25,000, Area 3: $15,000, Area 4: $70,000, Area 5: $45,000. Of the 5 areas explored, Areas 2, 4, and 5 have successfully resulted in discovery of recoverable oil reserves while Areas 1 and 3 have been abandoned. The estimated value of the oil discovered in the successful drilling areas is $1,500,000.
Required -
a. Record the entry for exploration costs using the successful-efforts method.
b. Record the entry for exploration costs using the full-cost method.
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