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

Exercise 11

Bear Oil Incorporated has two unproved leases with the following capitalized costs:
Lease C (600 acres) $20,000
Lease D (1,200 acres) $50,000
Bear Oil Incorporated negotiated a new lease on Lease C immediately following the end
of the primary term. The lease bonus was $60/acre on the new lease. Before the end of
the primary term, Bear Oil also obtained a new lease on Lease D at a lease bonus rate
of $40/acre. This lease was to take effect prior to the end of the primary term. Prepare
journal entries for the two leases.