Garcia Company has a 100% WI in a lease in a remote area of Wyoming. The lease
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Garcia Company has a 100% WI in a lease in a remote area of Wyoming. The lease provides for a 1/5 royalty. Garcia produces and sells a total of 150,000 Mcf of gas from the property during August. Of the 150,000 Mcf of gas, 50,000 Mcf are sold to a pipeline for $10.00/Mcf. Garcia sells the remaining 100,000 Mcf of gas to the local gas company for $10.00/Mcf. The 100,000 Mcf of gas, which must be transported to the local gas company, will be transported by Isaac Pipeline Company. Transportation charges are $0.25/Mcf.
REQUIRED: Ignore severance taxes. Prepare entries to record the sales by Garcia Company.
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