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

Exercise 3

The Jumper Oil Corporation incurs unproved property (Lease A) costs of $60,000 on
April 1, 2015. An 8% loan is obtained on April 1, 2015 for $500,000 to finance a drilling
program. Jumper started a well on Lease A on June 1, 2015, and the well is still in
progress at 12/31/15. Drilling costs to 12/31/15 are $300,000. The company excludes all
possible costs from the cost pool.
REqUIRED: Compute the interest capitalization amount and record the interest.