Which of the following most accurately describes the position taken by generally accepted accounting principles regarding the accounting for the costs of drilling dry wells in the oil and gas industry?
A) Only the successful efforts method may be used.
B) Only the full cost method may be used.
C) Both the successful efforts and full-cost methods may be used.
D) Neither the successful efforts method nor the full cost method may be used pending the development by the Securities and Exchange Commission of its own approach to accounting for the costs of drilling dry wells.

Question

Quizplus · Accepted Answer

Both the successful efforts and full-cost methods may be used to account for the costs of drilling dry wells in the oil and gas industry under generally accepted accounting principles. The successful efforts method capitalizes only the costs related to successful exploration, while the full-cost method capitalizes all exploration and development costs, including those related to dry wells. Companies must disclose which method they use in their financial statements.

Which of the Following Most Accurately Describes the Position Taken