(solution) The Iwata Oil Company incurred costs of $6 million during

(solution) The Iwata Oil Company incurred costs of $6 million during

The Iwata Oil Company incurred costs of $6 million during 2007 drilling for oil. Half the costs resulted in oil being found and half resulted in dry wells. The company expects the oil wells to produce 10% of their capacity each year from 2008 to 2017. Required 1. What amounts appear in the financial statements for 2008 under a. The successful-efforts method? b. The full-cost method? 2. Why do small oil companies generally prefer the full-cost method?