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

Exercise 30

Bruno Field is jointly owned by Ramsey Company (70% WI), which acts as field
operator, and Garza Company (30% WI). There is a 1/6 royalty. The 1/6 royalty is
shared proportionally by Ramsey and Garza. The two working interest owners have
agreed that Ramsey's purchaser will take gas produced in July, and Garza's purchaser
will take gas produced in August. Gas allocations will be equalized in September.
Assume each working interest owner receives payment only for gas delivered to his
purchaser(s). Ignore severance taxes.
Gross production and gas prices were as follows:
REqUIRED: a. Prepare the Gas Balance Report for Ramsey Company to summarize the
production deliveries and equalization of gas for July through September.
b. Prepare the journal entries for each company during the three-month period,
assuming that both companies use the sales method for both revenue and royalty.
c. Prepare the journal entries for each company during the three-month
period, assuming that both companies use the entitlement method for both
revenue and royalty.