Wildcat Oil Company owns a 100% WI in a proved property in Hays County, Texas. Wildcat sells the working interest to Knight Oil Company for $500,000, plus a retained production payment interest of $300,000, payable in cash from 55% of the working interest’s portion of the revenue. The capitalized cost of the working interest owner’s proved property is $800,000, and accumulated DD&A is

$300,000. The present value of the production payment interest is $280,000 and is reasonably assured of payout.

REQUIRED:

a. Prepare the entry to record the sale of the proved property, assuming that Wildcat uses the successful efforts method of accounting.

b. Prepare the entry for Wildcat, assuming that the full cost method of accounting is being used.