Belmont Resources, a successful efforts company, operates the Buckley lease in California. In June 2017, Belmont sold
Question:
Belmont Resources, a successful efforts company, operates the Buckley lease in California. In June 2017, Belmont sold 2,500 Mcf of gas @ 14.73 psia with heat content of 1.020 MMBtu/Mcf at 14.65 psia. The selling price of the gas was $3.00/MMBtu. The severance tax rate is 10%.
The Buckley lease has the following ownership interests:
John BuckleyRI0.1250
Belmont ResourcesWI0.7000
Rush EnergyWI0.3000
Belmont pays all applicable interest owners and remits severance tax to the state.
What amount will Belmont record as a receivable from the purchaser?
What amount will Belmont record as a payable to Rush Energy
(b)Consider the following facts regarding the sale of gas production on the Buckley lease:
The Gas Balancing Agreement between Belmont and Rush stipulates that any producer imbalances will be settled at the end of each calendar quarter.
Belmont sells 100% of the production for July of 2,500 Mcf.
Rush Energy sells 100% of the production of August of 3,000 Mcf.
Describe the differences in recording the sale of July production for each party using the Sales Method and Entitlement Method of recognizing revenue.
What is the volume amount that must be sold by each party to settle the imbalance in September assuming September's production is 5,000 Mcf?
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III