Kryan Corp

question 64

Essay

Kryan Corp. mines and produces aluminum. During 2012, the company explored two new sites and evaluated them for aluminum ore potential. By the December 31, 2012 year-end, both sites remained in the evaluation stage. During 2013, evaluation of site Apollo was completed and the site was deemed to have sufficient quantities of ore; consequently, development of the site began. However, site Braeden was determined to have ore concentrations too low to be commercially viable. The following is the cost of exploration and evaluation incurred on the two sites:
Required:
Record the journal entries in 2012 and 2013 relating to the exploration and evaluation costs using the successful efforts method. Assume that Kryan has a policy of capitalizing the costs of exploration and evaluation.

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Definitions:

Price Of Oil

The cost per barrel of crude oil, which fluctuates based on global market conditions, supply and demand, and geopolitical events.

Transportation Costs

Expenses associated with the movement of goods or people from one location to another.

Premium

A payment to an insurance company in return for the promise to pay a claim in certain states of the world.

Insurance Company

A business entity that provides financial protection and compensation for losses to individuals and entities in exchange for premium payments.