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integrated accounting
Questions and Answers of
Integrated Accounting
Tiger Oil Company, the operator of Lease A, purchased casing with a list price of \($60,000\) for a joint interest property in which it has a 40% WI. The vendor gives a discount of 10% off list price
Aggie Oil Company transferred an item of equipment from its wholly owned warehouse to a jointly owned lease in which it has a 70% WI. The item of equipment is in Condition B, and the current market
Ames, Inc. owns 60%, Garza Company owns 30%, and Nance Company owns 10% of the working interest property number 2008. Ames, Inc. is the operator and bills Garza and Nance monthly for their portion of
Cain Oil Company owns a piece of equipment, originally costing \($60,000\) that is currently being used on Lease A. Cain Oil Company owns a 40% working interest in Lease A and serves as the operator
Hamilton Oil Company is the operator of Leases A and B and has a 60% WI in each lease. A piece of equipment, which originally cost \($30,000,\) is transferred from Lease A to Lease B. The current
The Norwood Lease has the following working interest owners: Shamrock Company 50%, Diamond Company 25%, and Heart Company 25%. There is a 1/8 royalty on the lease. On April 1, 2001, Shamrock Company,
The Alpha lease is operated by APC Company. The foreman of the Alpha Lease must make a decision regarding the replacement of a pumping unit on the lease. The foreman has identified three possible
Hays, Bush, and King signed a lease agreement with Big Pink, the owner of the mineral rights. Big Pink received a 1/ 7 RI. The companies’ WIs are 50%, 30%, and 20%, respectively.The companies
Yale Oil Company owns the WI in a small lease in Louisiana that has a 1/6 RI. Yale also owns the WI in numerous leases in Texas. Not having the facilities in Louisiana to develop the Louisiana lease,
Mabel Oil Company owns 100% of the WI in a lease that has a 1/7 RI. Needing additional funds to develop the property, Mabel sold Pitt Company 60,000 barrels of oil for a consideration of
Lomax Company assigned 40% of the WI in an unproved property with a 1/8 RI to Mabel Company in return for Mabel Company bearing all costs of drilling, developing, and operating the property (until
Company Z (a successful-efforts company) owns 100% WI in a lease in which Dudley Smith owns a 1/8 RI. Company Z conveys to Company Q 30% of the WI in exchange for a cash consideration of \($10,000\).
Wildcat Oil Company leased undeveloped acreage from David Jones for \($30,000\) with Jones receiving a 1/8 RI. Financially unable to develop the lease, Wildcat enters into a farm-in/farm-out
Zink Company owns 100% of the WI in a fully developed lease on which there is a 1/8 RI. The lease has the following capitalized costs and reserve data as of January 1, 2007.On January 1, 2007, Zink
In 2006, Beta Company purchased the WI of an unproved lease for \($50,000\). In 2007, Beta Company recognized impairment of \($20,000\) on this lease. In 2008, Beta Company sold the entire WI to
Zepher Company acquired 100% of the WI in an unproved property at a cost of \($50,000\). Zepher later sold the WI, retaining an overriding royalty interest (ORI). Give the entry to record the
Brown Company, a SE company, has a 1/8 royalty interest in an unproved property.Assuming Brown Company’s net capitalized cost in the property is \($100,000\), give the entry to record the sale of
Wolfforth Company sold its 100% WI in a proved property for \($600,000\) and retained an ORI. Wolfforth’s net cost basis in the property was \($500,000\). The fair market value of the entire
Flower Company owns a 100% WI in an unproved property for which it paid $80,000.The property is burdened with a 1/8 royalty. Flower Company agrees to farm-out the WI to Barrel Company and retain a
French Company signed a lease agreement with Rita Mack covering 900 acres in Oklahoma. Ms. Mack received a bonus of \($50,000\) and a 1/5 RI and French Company received 100% of the WI.On 1/1/2008,
Fielder Oil Company, a SE company, has an unproved lease for which it paid $150,000.The property was individually significant and individual impairment of \($50,000\) had been assessed. Make the
Bammel Oil Company, a SE Company, has an unproved lease for which it paid $50,000.The property is not considered to be individually significant. Make the journal entries to record Bammel Oil
Gamble Company, a full-cost company, has an unproved lease for which it paid\($100,000\). Give the entry to record the sale of the property, assuming Gamble Company sold the property for:a. $80,000b.
Tiger Oil Company, a successful-efforts company, owns an ORI in an unproved property that cost \($20,000\). The ORI has not been impaired. Assume Tiger sold its entire interest in the ORI for the
Higgins Company receives \($200,000\) from Garza Company in payment for the right to purchase natural gas in the future.Prepare journal entries for each company assuming that they both use the
Hein Oil Company, a SE company, owns 100% of the WI in a proved property that has the following capitalized costs:A 1/8 royalty on the property is owned by Sammy Jones. Hein sells the WI for
Carpenter Oil Company owns a 100% WI in a proved property in Wise County, Texas.Carpenter sells the WI to Knight Oil Company for \($400,000\) plus a retained PPI of\($300,000\) payable in cash from
Sells Oil Company, a FC company, has total capitalized costs in Venezuela of\($20,000,000\) and accumulated DD&A of \($4,000,000\). Proved reserves in Venezuela are 2,000,000 barrels. Reserves of
Define and discuss the following:tubular goods gathering systems
Indicate whether each of the following items is a directly attributable operating expense (D), an allocable operating expense (A), or a capital expenditure (C):____ Repairs that can be traced to
District office expenses were \($48,000\) for July 2008. The district office supervised the following leases:a. Record lease operating expense, assuming allocation based on the number of wells.b.
Hard Luck Oil Company has a waterflooding system for a reservoir in Texas. Costs of operating the system for the month of June were \($20,400.\)a. Give the entry to record operating expense, assuming
Ebert Oil Company incurs the following costs relative to a gathering system:Give the entry to record the above costs, assuming the gathering system serves only one lease. a. Purchase and installation
Miller Oil Company purchased new tubing and casing to replace damaged tubular goods in a well. The new tubular goods were installed in a producing well. The cost of the items were as follows:Give any
Davenport Energy Company data in connection with Lease A is as follows:REQUIRED: Should the well be completed, assuming the following total production? Discuss your answer.Case A: 10,000 bbl Case
A saltwater disposal system is added to Lease A’s gathering system at a cost of \($150,000.\) The expense for the month of May, 2006 is \($15,000.\) Record the acquisition cost and the monthly
Ebert Oil Company pays the following amounts during June 2006, relating to producing leases: Supplies for Lease A Fuel for Lease A ... Labor cost for pumpers and gaugers-Lease A $ 300 800 2,000
Miller Oil Company has the following data in connection with Lease A:Miller Oil Company is sole owner of the working interest.If reserves are determined to be 20,000 barrels, is the well profitable?
Hard Luck Oil Company estimates the following costs to acquire, drill, and complete a well on Lease A:Would the investment be profitable if proved reserves are:a. 20,000 barrels?b. 30,000 barrels?c.
Knight Company has the following expenditures in May 2006:Record the above transactions. Lease A-Well #2: Cleaning and reacidizing formation ... Lease B-Well #3: Testing, perforating, and completion
Good Luck Oil Company drilled a successful gas well. Although capable of production, the well was shut-in awaiting the completion of a pipeline. Shut-in royalty payments of \($300\) per month were
Tyler Company operates the Salt Creek Field. Along with oil this field produces large quantities of saltwater. The saltwater is highly corrosive and, as a result, the downhole production equipment is
Mr. Davis owns the mineral rights in some land in Texas. He leases the land to Aggie Oil Company, reserving a 1/ 5 royalty. During 2006, Aggie Oil Company makes the following assignments:a. To Mr.
Blow Out Oil Company owns 100% of the WI in Lease A. Lease A is burdened with a 1/6 royalty. During the month of June, 12,000 barrels of oil were produced and sold.Assume the selling price of the oil
Ebert Oil Company sold 1,000 Mcf of gas at \($3.00/Mcf.\) The lease provides a 1/5 RI. The WI owner receives 100 percent of the revenues (net of 5% severance tax) and then distributes the amount due
Deep Hole Oil Company used 100 Mcf of gas obtained from Lease A and valued at \($2.10/Mcf\) for gas injection on Lease B. Assume production taxes are 5% and the RI on Lease A is a 1/6 RI.a. Give the
Fortunate Oil Company sold or used the gas produced on Lease A during January as follows:a. 300 Mcf used as fuel to operate lease equipment.b. 800 Mcf sold to R Company at \($3/Mcf.\)Assume a 1/ 7 RI
Big John Oil Company purchased 200 barrels of oil from JD Operator. The gross value of the oil was \($5,000.\) The severance tax rate was 4 percent. Give the entry to record revenue for JD, assuming
Gusher Oil Company has a working interest in a property. In addition to the 1/5 royalty, Gusher agreed to pay the royalty owner a minimum royalty of \($400\) per month. Gas production on the lease
Complete the run ticket on p. 341 and give the entry to record the sale of the oil at \($30/bbl\) assuming a severance tax rate of 5% and a 1/5 RI. Use the tables given in the chapter. The tank
Information from a run ticket shows that 1,000 net barrels of oil with an API gravity of 36° were sold. The selling price is based on a contract price of \($22\) per barrel, adjusted downward 4¢
Cameron Oil Company produced 2,000 barrels of oil in June 2007. The expected selling price was \($20\) per barrel. The purchaser pays the severance taxes and the royalty interest owner and remits the
Whitmire Oil Company owns a working interest in the Carpenter Lease in Texas. The lease is burdened with a 3/16 royalty interest. During February, 3,000 bbl of oil are sold at \($22/bbl\) to a
Cameron Oil Company operates Leases X and Y. Cameron Oil transfers 50 barrels of oil from Lease X to Lease Y to be used as fuel on Lease Y. The current spot oil price is \($22/bbl\) and the severance
Stephens Oil Company produces 2,000 bbl of oil in June that is sold in July. The posted field price and the actual selling price is \($22/bbl.\) The severance tax rate is 5%. The purchaser of the oil
Knight Oil Company has the following transactions in 2006.a. Minimum royalty payments of \($200\) per month are paid during the months of January through March. The minimum royalty payments are
Mr. Dube owns some mineral rights in Texas that he leases to Seagull Oil Company, reserving a 1/8 royalty interest. During 2006, Seagull Oil made the following assignments:a. To Mr. Hall, an ORI of
Joyner Oil Company sells 10,000 Mcf of gas at \($1.50/Mcf.\) The lease provides for a 1/6 RI, and the WI owner has distributed an ORI of 1/10. The severance tax rate is 7%.Record the entries for the
Gusher Oil Company’s production for Leases A and B is gathered into a common system and sold. Total Sales for the month are 6,562 barrels. Assume the following data for Leases A and B:Measured
Dube Company’s production from each well on Lease C and Lease D is estimated based on a 24-hour test. Oil produced from each well on each lease is commingled and measured before leaving each lease.
Cameron Company and Adams Company own 70% and 30% of the WI of the Dowling Field, respectively. There is a 1/8 royalty owner. The 1/8 royalty is shared proportionally by Cameron and Adams. Cameron
Ramsey Company has a 100% WI in some property in Texas. The property is burdened with a 1/8 royalty. Ramsey produces and sells a total of 130,000 Mcf of gas from the property during July. Of the
Fossil Oil Company has production on a lease in Louisiana with the following ownership interest: RI—1/5 RIORI—1/ 16 of 4/ 5 of gross productionJoint WI: Lomax Company (40%) and Fossil Company
Churchwell Company, a successful-efforts company located in California, sold 2,500 Mcf of gas with a heat content of 1.030 MMBtu/Mcf. The selling price of the gas was \($2.00\) per MMBtu.REQUIRED:a.
During September, 2010, Fortunate Oil Company sold 2,000 Mcf of gas at 14.65 psia with a heat content of 1.030 MMBtu/Mcf at 14.73 psia. The selling price of the gas was \($2.20\) per
Fossil Field is jointly owned by Allen Company (70% WI) who acts as field operator, and Garza Company (30% WI). There is a 1/6 royalty. The 1/6 royalty is shared proportionally by Allen and Garza.
Sherwood Field, located in East Texas, is jointly owned by Kelly Company (60%) and Tiger Company (40%). Kelly, who is the operator, estimates that gas production during July will be 40,000 Mcf. Kelly
Basic Oil Company incurred intangible costs during 20XA related to the following:a. Assuming Basic is an independent producer, how much IDC can it deduct for 20XA?b. How much IDC could Basic deduct
On January 1, 20XA, Core Oil Company bought a developed lease for \($300,000.\) During 20XA, Core Oil Company incurred \($600,000\) of IDC. Reserves of 400,000 barrels were discovered, and 100,000
During 20XA, Gravity Oil Company incurred G&G costs of \($20,000\) for Project Area 15. Two areas of interest were identified. Detailed seismic studies were conducted on the areas of interests at
Universal Oil Company, an independent producer, began operations in June 20XA.During the first 21/2 years of operation, Universal acquired only two U.S. properties, which were noncontiguous. Costs
How does amortization of leasehold costs differ under the three methods? Include in your answer a discussion of the reserves used (PR or PDR), which costs are amortized, and the cost center used
Hard Times Oil Company, an integrated producer, has an unproved property with acquisition and capitalized G&G costs of \($35,000.\) Hard Times also has a proved property with the following
On March 1, 20XA, Jerry Barnes purchases mineral rights for \($30,000.\) On June 1, 20XA, he leases the mineral rights to Brown Oil Company retaining a 1/5 royalty interest. Brown Oil Company pays
Jones Oil Company paid the following amounts in 20XD:Determine the tax basis of any assets and the amount of any tax deductions. Shut-in royalty payments (not recoverable).. Shut-in royalty payments
Davenport Energy Company, an independent producer, has the following account balances at 1/1/20XA:Determine the amount of the tax loss on the following dates:a. On March 1, 20XA, the unproved
Aggie Oil Company has the following information:The lease is subleased to Acme Oil Company for \($300,000,\) and Aggie retains an 1/16 ORI. At the date of the sublease, the FMV of the equipment is
During 20XB, Dixie Company incurs the following costs relating to Lease A, a producing property: Supplies for Lease A...... Labor cost for pumpers and gaugers- Lease A..... Ad valorem tax on Lease
Aggie Oil Company, an independent producer, has average production from Lease A of 100 barrels per day in 20XA from Lease A. The average selling price of oil in 20XA is \($23\) a barrel. Net income
Define the following:a. IDCb. elected capitalized IDCc. sublease
Dowling Company, an integrated producer, incurs IDC costs in the following years as indicated. The IDC marked with an asterisk (*) relate to dry hole IDC.REQUIRED: Compute the amount that may be
Isaac Company owns and operates four oil and gas properties that are classified for tax purposes as four separate properties. Data for the four properties are presented below:REQUIRED: Compute the
Aggie Oil Company owns only one lease in the United States, Lease Q. The following information for Lease Q, which is burdened with a 1/6 royalty, is as of 12/31/20XD. All reserve, production, and
Given the following, compute DD&A, assuming no exclusions from the amortization base. Unrecovered costs Net salvage value of properties Estimated future development costs for proved reserves
Data for Pride Oil Company for 12/31/06 are as follows:a. Compute DD&A using a common unit of measure based on BOE.b. Compute DD&A using the unit-of-revenue basis.c. Which would be the
Wildcat Oil Company began operations January 1, 2005. Transactions for the first three years include the data below. Using that data:a. Prepare journal entries assuming FC (ignore revenue entries and
Aggie Oil Company began operations in 2006. Give the entries, assuming the following transactions in the first three years of operations. Calculate DD&A twice, once assuming no exclusions and
Data as of 12/31/05 for Gusher Oil Company’s U.S. properties are as follows:a. Use T accounts to accumulate costs.b. Calculate DD&A for 2006, assuming no cost exclusions and using a common unit
The Jones Oil Company started its oil and gas exploration and production business in 2005. During the year 2005 and 2006, the company provided the following information relating to leases located
The Ebert Oil Company provides the following information for the year ended December 31, 2007:REQUIRED:a. Prepare a ceiling test and an entry, if necessary, for the write-off of capitalized
Cruser Oil, a full-cost company, incurs the following costs during 2006:During 2007, the following costs were incurred:Delay rentals were paid on Leases A & B of \($2,000\) and \($3,000\)
The Hard Luck Oil Company incurs unproved property (Lease A) costs of \($60,000\) on April 1, 2005. An 8% loan is obtained on April 1, 2005, for \($500,000\) to finance a drilling program. Hard Luck
Hays Oil Company has the following account balances at 12/31/05:The above properties are abandoned in 2006. Record the abandonment entry. Lease A: Unproved property Lease B: Proved property Wells and
Wildcat Oil Company has the following account balances at 12/31/05:At 12/31/05, Lease A is considered to be 40% impaired. Wildcat Company’s estimated abandonment rate of insignificant unproved
Use the same facts as Problem 19 and prepare entries using the following independent assumptions:a. Lease A is abandoned in 2006.b. Lease A is proved in 2006.c. Insignificant Lease Y, with a cost of
Roberts Oil Company has the following information at 12/31/05: Capitalized costs, plus future development costs Accumulated DD&A.. Proved reserves-Oil $2,000,000 800,000 200,000 bbl 800,000 Mcf -Gas
Basic Company started operations on 1/1/05. At 12/31/05, the company owned the following leases in Canada:The production was sold at \($24/bbl\) and \($1.50/Mcf.\) Current prices at 12/31/05 are
Data for Lucky is as follows for all U.S. properties:a. Apply the FC ceiling test and record any entries necessary, assuming that all possible costs are excluded from amortization.b. Apply the FC
Big John Oil Company, located in Southern California, has been operating for three years. Big John uses full-cost accounting and excludes all possible costs from the amortization base. The following
Gusher Oil Company began operations on 1/5/2001 and has acquired only two properties.The two properties, which are both considered significant, are located in different states. Lease B was proved on
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