During 2009, Prospect Oil Corporation Incurred $4,000,000 in Exploration Costs

During 2009, Prospect Oil Corporation incurred $4,000,000 in exploration costs for each of 15 oil wells drilled in 2009. Of the 15 wells drilled, 10 were dry holes. Prospect uses the successful efforts method of accounting. Assuming that Prospect depletes 30% of the oil discovered in 2009, what amount of these exploration costs would remain on its 12/31/09 balance sheet?

A) $ 6 million
B) $14 million
C) $20 million
D) $42 million Capitalize the wells that are not dry holes: 5 $4 million = $20 million.Of this, 30% is depleted in 2009 and the rest remains on the balance sheet.