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

Exercise 8

Gusher Oil Company has the following transactions in 2011:
a. Minimum royalty payments of $200/month are paid during the months of January
through March. The minimum royalty payments are recoverable from future royalty
payments.
b. Production was sold in April 2011, and the royalty payable in April is $300.
c. The royalty payment in May is $500.
d. The well quit producing in June, and the lease was abandoned.
REqUIRED:
1. Prepare entries for the above transactions.
2. Prepare entries assuming the royalty payments are not recoverable.