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

Exercise 5

The following transactions relate to one lease:
a. On March 10, 2017, Axis Petroleum paid delinquent property taxes of $2,000 on
an undeveloped lease. Assume that these taxes are recoverable out of future delay
rental or royalty payments. Give the entry to record payment.
b. On February 15, 2018, a delay rental payment of $800 is due. Determine the
amount of cash actually paid and give the entry to record payment.
c. On July 21, 2018, Axis Petroleum decided to surrender the lease. Give the entry
to record abandonment with respect to the delinquent property taxes. Ignore
acquisition costs of the property.
d. Assume instead that the $2,000 payment of delinquent taxes was not recoverable
and was made at the time Axis Petroleum was acquiring the lease. Give the entry to
record the payment.
e. Assume instead that the $2,000 payment was not recoverable and was made by Axis
Petroleum six months after acquiring the lease in order to protect Axis' investment.
Give the entry to record the payment.