Soorya Resources incurred the following costs: $$\begin{array} { | l | c | c | c | }
\hline \text { Mine Site } & \begin{array} { c }
\text { Costs incurred in } \
\text { exploration and } \
\text { evaluation }
\end{array} & \begin{array} { c }
\text { Costs incurred in } \
\text { development }
\end{array} & \text { Status at year-end } \
\hline \text { Alpha } & 300,000 & 100,000 & \begin{array} { c }
\text { Producing } @ 5 \% \text { of } \
\text { reserves }
\end{array} \
\hline \text { Beta } & 200,000 & & \text { Abandoned } \
\hline \text { Zeta } & 100,000 & 200,000 & \text { In development } \
\hline
\end{array}$$ How much would be capitalized as "intangible assets" under the successful efforts method?
A)$300,000
B)$400,000
C)$500,000
D)$600,000

Question

Soorya Resources incurred the following costs: $$\begin{array} { | l | c | c | c | } 
\hline \text { Mine Site } & \begin{array} { c } 
\text { Costs incurred in } \
\text { exploration and } \
\text { evaluation }
\end{array} & \begin{array} { c } 
\text { Costs incurred in } \
\text { development }
\end{array} & \text { Status at year-end } \
\hline \text { Alpha } & 300,000 & 100,000 & \begin{array} { c } 
\text { Producing } @ 5 \% \text { of } \
\text { reserves }
\end{array} \
\hline \text { Beta } & 200,000 & & \text { Abandoned } \
\hline \text { Zeta } & 100,000 & 200,000 & \text { In development } \
\hline
\end{array}$$ How much would be capitalized as "intangible assets" under the successful efforts method?
A)$300,000
B)$400,000
C)$500,000
D)$600,000

Quizplus · Accepted Answer

Under the successful efforts method, only the costs associated with successful exploration and development efforts are capitalized. For Alpha, both exploration ($300,000) and development ($100,000) costs are capitalized since it is producing. For Beta, the exploration costs ($200,000) are expensed because the site was abandoned. For Zeta, the exploration costs ($100,000) are capitalized because it is still in development, indicating success so far, but the development costs ($200,000) are also capitalized as it is part of the successful development efforts. Therefore, the total capitalized as intangible assets is $300,000 (Alpha) + $100,000 (Zeta exploration) + $200,000 (Zeta development) = $600,000.

Soorya Resources Incurred the Following Costs How Much Would Be Capitalized as "Intangible Assets" Under the |