Hays Company (a successful efforts company) owns 100% WI in a lease that is burdened with a 1/8 royalty interest owned by Alfred Smith. The undeveloped lease has capitalized costs of $40,000 and an impairment allowance of $15,000.

REQUIRED:

a. Assume that Hays Company conveys a 30% WI to Dillon Company in exchange for a cash consideration of $10,000. Give the entry for Hays Company to record the conveyance.

b. Assume that Hays Company conveys a 30% WI to Dillon Company in exchange for a cash consideration of $30,000. Give the entry for Hays Company to record the conveyance.