Blow Out Oil Company owns 100% of the WI in Lease A. Lease A is burdened with

Question:

Blow Out Oil Company owns 100% of the WI in Lease A. Lease A is burdened with a 1/6 royalty. During the month of June, 12,000 barrels of oil were produced and sold.

Assume the selling price of the oil was $24/bbl and the production tax was 5%. Give the entry required to record the sale of the oil for each of the following:

a. The purchaser assumes responsibility for distributing taxes and royalty income.

b. Blow Out Oil Company assumes the responsibility.

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