Cameron Company and Adams Company own 70% and 30% of the WI of the Dowling Field, respectively. There is a 1/8 royalty owner. The 1/8 royalty is shared proportionally by Cameron and Adams. Cameron and Adams agree that Cameron’s purchaser will take March’s gas production and Adam’s purchaser will take April’s production. Gas allocations will be equalized in May. Ignore severance taxes.

Production and gas prices were as follows:

Each working interest owner receives payment only for gas delivered to his purchaser.

REQUIRED:

a. Prepare a gas balance report.

b. Prepare entries for the three-month period for both parties assuming both companies use the entitlement method for both revenue and royalty.

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Production Price March 300,000 Mcf $2.00/Mcf April 200,000 Mcf 2.00/Mcf May 220,000 Mcf 1.80/Mcf