CHAPTER 7: ACCOUNTING FOR REVENUE FROM OIL AND GAS OIL AND GAS ACCOUNTING (ACC413) SEMESTER II, 2022-2023 QUESTION 1 Stephens Oil Company produces a total of 2,000 barrels of oil in June and sold it in July. The selling price of the oil is $66/bbl. The severance tax rate is 5%. The purchaser will pay the severance tax to the state and also pay the royalty interest owner. The royalty interest is 1/5. REQUIRED: Prepare entries assuming Stephens Oil recognizes revenue (a) at time of sales and (b) at the time of production. QUESTION 2 Ms Kyle owns some mineral rights in Louisiana that she leases to Seagull Energy Company, reserving a 1/5 royalty interest. During year 2022, the Seagull made the following assignments: 1. To Hall Energy Company, an ORI of 1/6 2. To Wilson Oil Company, a joint working interest of 40% after considering the above assignments. During the year 2022, 10,000 (gross) barrels of oil were produced and sold. Assume the selling price of the oil is $60/bbl, and severance tax rate in Louisiana is 5%. REQUIRED: a) Prepare the journal entry for Seagull Energy Company to record the sale of the oil, given that the purchaser assumes the responsibility of distributing severance taxes and royalty income. b) Prepare the journal entry for Seagull Energy Company to record the sale of the oil, given that the Seagull assumes the responsibility of distributing severance taxes and royalty income. c) Prepare the journal entry for overriding royalty interest owner to record the sale of the oil. d) Prepare the journal entry for Wilson Oil Company to record the sale of oil