Fundamentals of Oil & Gas Accounting 5th Edition by Rebecca Gallun, Charlotte Wright

Exercise 8

Bryant Oil Corporation acquired a lease on October 15, 2015, for $200,000 cash. No
drilling was done on the lease during the first year. Since Bryant wished to retain the
lease, a delay rental of $10,000 was paid on October 15, 2016. During November and
December of 2016, three dry holes were drilled on surrounding leases. Based on the
dry holes, Bryant's management decided that the lease was 75% impaired. Bryant had
still not started drilling operations by the end of the second year and so paid a second
delay rental. During November 2017, with less than one year of the primary term
left, Bryant drilled a dry hole on the lease and decided to abandon the lease. Because
the end of Bryant's accounting period is December 31 and for income tax purposes,
Bryant executed a quit claim deed and relinquished all rights to the lease the last day of
November 2017. Give the entries.