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Company A and Company B enter into an agreement where Company A, the carrying party, will drill a well to a specified depth on Bs

Company A and Company B enter into an agreement where Company A, the carrying party, will drill a well to a specified depth on Bs lease. Company A will have 100 percent of the working interest until payout. After payout, Company A will have a 50 percent WI and Company B will have a 50 percent WI. The leasehold acquisition costs paid by Company B were $90,000. Company A incurred IDC of $880,000 and equipment costs of $150,000. The lease is subject to a 1/8 royalty interest. The estimated sales price per barrel of oil is $80 and the estimated operating expenses are $15 per barrel. The severance tax rate is 5%.

The estimated reserves before any production are as follows:

Proved reserves 70,000 barrels

Proved developed reserves 40,000 barrels

QUESTION:

What is the balance in the payout account after drilling and equipping the well, but before any production?

Group of answer choices

$970,000

$1,030,000

$1,120,000

$940,000

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