A lease operated by Rocky Oil Company produces a total of 3,000 barrels of oil in June.
Question:
A lease operated by Rocky Oil Company produces a total of 3,000 barrels of oil in June. The oil is sold in October. The posted field price and the actual selling price is $100/bbl. The severance tax rate is 5%. The purchaser of the oil will pay the severance tax to the state and also will pay the royalty interest owner. The royalty interest is 1/5.
REQUIRED: Prepare entries assuming Rocky Oil recognizes revenue
(a) at time of sale, and
(b) at time of production based on the posted field price.
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Step by Step Answer:
To prepare the entries lets consider two scenarios a Recognizing revenue at the time of sale b Recog...View the full answer
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