Question # 3 (8 marks) Spring Oil Corporation reported the following transactions: a) lease C...
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Question # 3 (8 marks) Spring Oil Corporation reported the following transactions: a) lease C was abandoned on September 2018. The lease is significant and had a cost of $1,200,000 and impairment balance of $800,000. b) Lease G is part of insignificant leases and was abandoned on July 2018. The lease records show a cost of $200,000 and total group impairment balance of $336,000. c) Lease H reported net capitalized costs of $855,250 and ceiling amount of $750,000 assuming no exclusion from amortization. Instructions I. Provide the necessary accounting entries to record the above transactions. II. Explain the reasons behind your answer of part (c). Question # 4 (7 marks) Nasa Oil Company incurred $180,000 to add a saltwater disposal system. The operating costs of this system is $18,360 for the month of July 2019. The disposal system serves three different leases. Following are information related to these leases: Lease A B Injection wells 3 5 7 Volume of water 240 540 750 Record the acquisition of the saltwater system and the monthly operating cost, assuming allocation based on the volume of water
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