The possible methods for accounting for pre-production costs in the extractive industries include:
A) costs-written-off-and-reinstated method and ABC-cost method.
B) successful-effort method and area-of-interest method.
C) reserve-accounting method and successful-effort method.
D) percentage-of-completion method and costs-written-off-and-reinstated method.

Question

Quizplus · Accepted Answer

The two methods commonly used for accounting for pre-production costs in the extractive industries are the successful-effort method and the area-of-interest method. The successful-effort method only capitalizes costs related to successful exploration efforts, while the area-of-interest method capitalizes all exploration costs in a specified area. Therefore, option B is the correct answer.

The Possible Methods for Accounting for Pre-Production Costs in the Extractive