Delta Oil Company uses the successful efforts method to

account for #2635

Delta Oil Company uses the successful-efforts method to account for oil exploration costs. Delta
started business in 2014 and prepared the following income statements:The company choose
to change to the full-cost method at the beginning of 2016. Under the full-cost method, Delta
capitalizes all exploration costs of the Oil and Gas Properties asset account on its balance
sheet. It determines the exploration and amortization expense amounts under the full-cost
method to be as follows:In addition, Delta reported revenue of $9,000,000 and other expenses
of $4,200,000 in 2016. With the 2016 financial statements, the company issues comparative
statements for the previous 2 years.Required:1. Prepare the journal entry to reflect the
change.2. Prepare the comparative income statements and the comparative statements of
retained earnings for 2016, 2015, and 2014. Notes to the financial statements are not
necessary.3. Discuss the advantages and disadvantages of accounting for a change in this
manner.View Solution:
Delta Oil Company uses the successful efforts method to account for

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