ENG Oil Company produced and sold 30,000 barrels of oil during May 2020 at $60/bbl from lease A. The company has 4/5 revenue interest in the above lease with 60% working interest. North Oil Company is a non-operator working interest owner in Lease A. In addition, National Company purchased ORI in lease A. The severance tax rate applied is 5% and ENG reported a revenue of $810,000 for May sales. a. Prepare the journal entry for ENG 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 ENG to record the sale of the oil, given that ENG assumes the responsibility and receives 100% proceeds. c. Prepare the journal entry for National Company to record the sale of oil.
ENG Oil Company produced and sold 30,000 barrels of oil during May 2020 at $60/bbl from lease A. The company has 4/5 revenue interest in the above lease with 60% working interest. North Oil Company is a non-operator working interest owner in Lease A. In addition, National Company purchased ORI in lease A. The severance tax rate applied is 5% and ENG reported a revenue of $810,000 for May sales.
a. Prepare the
the purchaser assumes the responsibility of distributing severance taxes
and royalty income.
b. Prepare the journal entry for ENG to record the sale of the oil, given that
ENG assumes the responsibility and receives 100% proceeds.
c. Prepare the journal entry for National Company to record the sale of oil.
d. Prepare the journal entry for the royalty interest owner to record the sale
of oil.
e. Prepare the journal entry for the overriding interest owner to record the
sale of oil.
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