Monday, October 11, 2010


A sharing arrangement in which the sponsor bears capitalized costs such as the oil rig while limited partners take a share of intangible drilling costs is known as a(an)
A. functional allocation
B. overriding royalty interest
C. reversionary working interest
D. disproportionate sharing arrangement

EXPLANATION: too many Series 7 candidates put too much effort on options and debt securities to the detriment of everything else. Topics such as DPPs, which account for about 10 questions, also need your attention. A question like this really requires that you've studied--I don't see a lot of obvious things to be eliminated. What the GP and LPs are doing here is allocating the costs according to their function (capitalized vs. intangible). Functional allocation.



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