Heagy Oil Company has production on a lease in Louisiana with the following ownership interest:

During April, 5,000 (gross) barrels of oil (after correction for temperature, gravity, and BS&W) were produced and sold. Assume the price for oil is $120.00/bbl, and the severance tax rate in Louisiana is 5%.

REQUIRED:

a. Prepare the journal entry for Heagy Oil to record the sale of the oil, given that the purchaser assumes the responsibility of distributing severance taxes and royalty income.

b. Prepare the journal entry for Heagy Oil to record the sale of the oil, given that Heagy Company assumes the responsibility and receives 100% of the proceeds.

c. Prepare the journal entry for the royalty interest owner to record the sale of the oil.

d. Prepare the journal entry for the overriding royalty interest owner to record the sale of the oil.

e. Prepare the journal entry for Lomax to record the sale of the oil.

Transcribed Image Text:

RI-1/5 RI ORI-1/16 of 4/5 of gross production Joint WI- Amax Company (40%) and Heagy Company (60%)