Flower Company owns a 100% WI in an unproved property for which it paid $80,000.

The property is burdened with a 1/8 royalty. Flower Company agrees to farm out the working interest to Barrel Company and retain a 1/7 ORI in return for Barrel Company agreeing to drill, develop, and operate the property. During 2015, Barrel Company incurs costs of \($200,000\) in drilling a well and \($100,000\) to equip the well. The total proved reserves are estimated to be 75,000 barrels, and proved developed reserves are 25,000 barrels. Production during 2015 totaled 5,000 barrels, which was sold for $80/

bbl. Ignore severance tax and assume Barrel pays the royalty interest and ORI owners.

a. Give the entries that would be made by Flower Company, assuming it uses the successful efforts method.

b. Give the entries that would be made by Barrel Company, assuming it uses the successful efforts method.