Carpenter Oil Company owns a 100% WI in a proved property in Wise County, Texas.

Carpenter sells the WI to Knight Oil Company for \($400,000\) plus a retained PPI of

\($300,000\) payable in cash from 60% of the WI’s portion of the revenue. The capitalized cost of the WI owner’s proved property is \($800,000\) and accumulated DD&A is

\($200,000\). The present value of the PPI 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 SE method of accounting.

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