Libby Oil Company has a working interest in a remote lease located in Wyoming.

Libby agreed to pay the royalty owner a minimum royalty of $500/month in addition to the 1/5 royalty. Gas production on the lease began in the third month after the lease contract was signed. Total sales revenue during the third month and the next two months was $6,000 each month. The severance tax rate was 10%.

REQUIRED: Give the revenue and minimum royalty entries for the first five months, assuming Libby takes the responsibility of distributing taxes and royalty, and also assuming the following:

a. The minimum royalty payments were not recoverable.

b. The minimum royalty payments were recoverable.