Use the tables, and information provided to solve the questions

Assume the following data for the following wells commingled production tanks on the Willmington Ranch located in LaVaca County, Texas. Measured production is 2,000 2,000 barrels from Lease C and 2,280 2,280 barrels from Lease D. After treatment at the central tank battery, 4,500 4,500 barrels are sold. Current Spot Oil Price 46 /bbl Severance Tax Rate 0.05 Working interest 1 Royalty Interest 0.125 -->> it is 1/8 QUESTIONS: TO ANSWER Prepare entries recognizing revenue at time of sale if the OPERATOR assumes the responsibility of distributing severance taxes and royalty. What amount of gross revenue, royalty, severance taxes and net revenue should the Operator record for each well (Lease C-Well 1& Well 2 and Lease D-Well 1, Well 2, & Well 3)? Step 1: Allocate sales from tank battery to each leasse. Ratio of sales to total production leases 4,100/4280 = 0.958 calculate: Measure Production Ratio Allocated Sales Lease 2,000 0.958 1916 D 2280 x 0.958 2184 4,280 4100 Step 1: Lease C-Allocate 1,916 bbls to Well 1 & Well 2 Step: Ratio of sales allocated to Lease Cto total theoretical production from wells on Lease C= 1916 1 2040 0.939 Days Theoretical Well 24-hr Test Produced Production Ratio Allocated Sales Well 1 30 28 840 0.939 789 Well 2 40 30 1200 0.939 1127 2040 1916 Step 2: Lease D-Allocate 2,181 bbls to Well 1, Well 2 and Well 3 Ratio of sales allocated to Lease D total theoretical production from wells on Lease D= D= 2184 / 2370 0.922 Well Well 1 Well 2 Well 3 24-hr Test 20 30 35 Days Theoretical Produced Production 27 540 26 780 30 1050 2370 Ratio Allocated Sales 0.922 498 0.922 719 0.922 968 2184