Fundamentals of Oil & Gas Accounting 5th Edition by Rebecca Gallun, Charlotte Wright

Exercise 3

Gusher Oil Corporation obtained shooting rights only for $10,000 on 5,000 acres
owned by Mr. Q and shooting rights coupled with an option to lease for $12,000 on
4,000 acres owned by Mr. S. The 4,000 acres owned by Mr. S are located adjacent to the
5,000 acres owned by Mr. Q. Ignore any other acquisition costs.
a. Give the entries to record the rights obtained, assuming there is no apportionment
of the cost between the option and the shooting rights.
b. Give the entry to record the rights obtained from Mr. S, assuming instead that the
$12,000 was apportioned between the option and the shooting rights.
c. Give the entry to record the leasing of all 4,000 of Mr. S's acres, assuming that the
original cost of $12,000 was not apportioned between the option and the shooting
rights.
d. Give the entry to record the leasing of only 1,000 acres from Mr. S, again assuming
that the original cost of $12,000 was not apportioned. Also assume Gusher did not
apportion the amount in the suspense account based on the acreage leased.
e. Give the entry to record the leasing of 1,000 acres from Mr. S, assuming that the
original cost of $12,000 was not apportioned. Assume that Gusher Oil Corporation
apportioned the amount in the suspense account based on relative acreage leased.