Q1. Shut-In Oil Company obtained shooting rights only for $10,000 on 5,000 acres owned

by Mr. Q and shooting rights coupled with an option to lease for $12,000 on 4,000 acres

owned by Mr. S. The 4,000 acres owned by Mr. S are located adjacent to the 5,000 acres

owned by Mr. Q. Ignore any other acquisition costs.

a. Give the entries to record the rights obtained, assuming there is no apportionment of

the cost between the option and the shooting rights.

b. Give the entry to record the rights obtained from Mr. S, assuming instead that the

$12,000 was apportioned between the option and the shooting rights.

c. Give the entry to record the leasing of all 4,000 of Mr. Ss acres, assuming that the

original cost of $12,000 was not apportioned between the option and the shooting

rights.

d. Give the entry to record the leasing of only 1,000 acres from Mr. S, again assuming

that the original cost of $12,000 was not apportioned. Also assume Shut-In did not

apportion the amount in the suspense account based on the acreage leased.

e. Give the entry to record the leasing of 1,000 acres from Mr. S, assuming that the original

cost of $12,000 was not apportioned. Assume that Shut-In Oil Company apportioned

the amount in the suspense account based on relative acreage leased.

Q2. The following transactions relate to one lease:

a. On March 10, 2007, Core Oil Company paid delinquent property taxes of $2,000 on

an undeveloped lease. Assume that these taxes are recoverable out of future delay rental

or royalty payments. Give the entry to record payment.

b. On February 15, 2008, a delay rental payment of $800 is due. Determine the amount

of cash actually paid and give the entry to record payment.

c. On July 21, 2008, Core Oil Company decided to surrender the lease. Give the entry

to record abandonment with respect to the delinquent property taxes. Ignore acquisition

costs of the property.

d. Assume instead that the $2,000 payment of delinquent taxes was not recoverable and

was made at the time Core Oil was acquiring the lease. Give the entry to record the

payment.

e. Assume instead that the $2,000 payment was not recoverable and was made by Core

Oil six months after acquiring the lease in order to protect Cores investment. Give the

entry to record the payment.