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

Exercise 20

Young Company has a 100% WI in some property in Texas. The property is burdened
with a 1/8 royalty. Young produces and sells a total of 130,000 Mcf of gas from the
property during July. Of the 130,000 Mcf, 50,000 Mcf of gas is sold to a pipeline for
$10.00/Mcf. Young sells the remaining 80,000 Mcf of gas to the local gas company
for $10.00/Mcf. The 80,000 Mcf of gas, which must be transported to the local gas
company, will be transported by Isaac Pipeline Company. Transportation charges are
$0.26 per Mcf.
REqUIRED: Ignore severance taxes. Prepare entries to record the sales by
Young Company.