Question

CHAPTER9 Production Activiries and Project Analysis313 -Recompletion for the purpose of obtaining new production Depreciation of district office facilities Texas Oil Company operates solely in the United States. The following amounts are paid during June 2018 relating to producing leases: 4. ..15,000 Supplies for Lease A Labor cost for pumpers and gaugers Lease A Fringe benefits of pumpers and gaugers who work on several leases. Salaries and fringe benefits of regional supervisors······· Contract labor for refracturing well of Lease A .. .. Property tax-Lease A. Transportation cost for several leases 8,000 20,000 12,000 10,200 REQUIRED: Record the above transactions. 5. West Texas district office expenses were $50,000 for July 2018. The district office supervised the following three leases: Number of Wells 8,000 5,000 7,000 B. REQUIRED: a. Record lease operating expense, assuming allocation based on the number of wells. b. Record lease operating expense, assuming allocation based on the barrels of oil produced 6. Economy Oil Corporation has a waterflooding system for a reservoir in Okla- homa. Costs of operating the system for the month of July were $40,000. a. Give the entry to record operating expense, assuming the reservoir underlies only Lease A. b. Assume the reservoir underlies the following three leases: , Lease Producing Wells Injection Wells Volume of Water 500 400 100 REQUIRED: Give the entry to record operating expense, assuming allocation based on the volume of water.

Answer 1

Answer for the Question no.4
Recording the Transactions incurred
Fuel for Lease A			$    50,100.00	> considered as lease operating lease Expenses
Supplies for Lease A			$    15,000.00	> considered as lease operating lease Expenses
Labor cost for pumpers
and gaugers			$    20,500.00	> considered as lease operating lease Expenses
Fringe benefits of pumpers
and gaugers who work on Several leases			$      8,000.00	on whole it considered for operating lease expenses
				common for all lease not only for lease A
Salaries and fringe benefits of regional
supervisors			$    20,000.00	> considered as lease operating lease Expenses
Contract labor for refracturing well of Lease A			$    12,000.00	> considered as lease operating lease Expenses
Property Tax - Lease A			$    14,000.00	> considered as lease operating lease Expenses
Transportation cost fore Several Lease			$    10,200.00	on whole it considered for operating lease expenses
				common for all lease not only for lease A
			$ 149,800.00
Entries
Lease Operating Expenses			$ 149,800.00
Bank/Cash				$ 149,800.00
(Being the expenses incurred on Leases)

Answer for the Quesiton no.5
Expenses for west texas district office were amounted to $ 50,000 for the month of July 2018
the district officer supervised the following three leases
Lease		Number of wells		oils production, bbl
A		5		8,000
B		4		5,000
C		1		7,000
	total	10		20,000
a.	Assuming that allocation is based on number of wells
	Lease		Computation		Amount
	A		$ 50,000 X 5/10		$ 25,000.00
	B		$ 50,000 X 4/10		$ 20,000.00
	C		$ 50,000 X 1/10		$    5,000.00
		Total			$ 50,000.00
b.	Assuming that allocation is based on oil production
	Lease		Computation		Amount
	A		$ 50,000 X 8000/20000		$ 20,000.00
	B		$ 50,000 X 5000/20000		$ 12,500.00
	C		$ 50,000 X 7000/20000		$ 17,500.00
		Total			$ 50,000.00

Answer for the Quesiton no.6
a.The entry to record operating expenses , assuming that the reservoir underlies
only Lease A
Lease Operating Expenses				$40,000
Lease A / Cash
( Being the cost incurred for the month of July)
b. Give the entry to record operating expenses, assuming allocation based on the
volume of water
	Lease		Computation		Amount
	A		$40,000X500/1000		$ 20,000.00
	B		$40,000X400/1000		$ 16,000.00
	C		$40,000X100/1000		$    4,000.00
				Total	$ 40,000.00
	Entries
	Lease Operating Expenses				$ 20,000.00
	Lease A					$ 20,000.00
	( Being opering expenses expenses incurred
	for Lease A based on volume of water)
	Lease Operating Expenses				$ 16,000.00
	Lease B					$ 16,000.00
	( Being opering expenses expenses incurred
	for Lease B based on volume of water)
	Lease Operating Expenses				$    4,000.00
	Lease C					$    4,000.00
	( Being opering expenses expenses incurred
	for Lease C based on volume of water)