Prospect Oil Company sold a total of 1, 000Mc gas at $9/ Mcf. The lease provides a 1/5 RI. The working interest owners receives 100% of the revenue (net of 5% severance tax) and then distributes the amount due to the royalty interest owner. REQUIRED: Give the entry by Prospect to record the sale of the gas.
Prospect Oil Company sold a total of 1, 000Mc gas at $9/ Mcf. The lease provides a 1/5 RI. The working interest owners receives 100% of the revenue (net of 5% severance tax) and then distributes the amount due to the royalty interest owner. REQUIRED: Give the entry by Prospect to record the sale of the gas.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prospect Oil Company sold a total of 1, 000Mc gas at $9/ Mcf. The lease provides a 1/5 RI. The working interest owners receives 100% of the revenue (net of 5% severance tax) and then distributes the amount due to the royalty interest owner.
REQUIRED: Give the entry by Prospect to record the sale of the gas.
Expert Solution
Step 1
The revenue for the government has substantial increase because of the growth of oil and gas production in the U.S.
The resource producers or the person involved in the production of natural resources have to pay a severance tax and royalty tax imposed by the states in the U.S. This is calculated on the volume sold or production depending on states.
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