In 2010, Golf Oil Company incurred costs of $7 million drilling oil wells.Thirty percent of the drilling resulted in oil being found.The rest of the drilling was unsuccessful.If Golf uses the successful-efforts method of accounting, the oil and gas properties will be valued on the December 31, 2010 balance sheet at

A) $7, 000, 000
B) $4, 900, 000
C) $4, 200, 000
D) $2, 100, 000

Successful-Efforts Method

An accounting approach used in the oil and gas industry where costs are capitalized only if they lead to successful finding of new oil or gas reserves.

Drilling

The process of creating holes in the earth's surface in preparation for the exploration or extraction of resources, such as oil and gas.

Oil Wells

Structures drilled into the earth for the purpose of extracting petroleum and other hydrocarbons.