Carpenter Oil Company owns a 100% WI in a proved property in Wise County, Texas. Carpenter sells the working interest to Knight Oil Company for \($400,000\), plus a retained production payment interest of \($300,000\), payable in cash from 60% 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 \($200,000\). The present value of the production payment interest is \($250,000\) and is reasonably assured of payout.

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

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