Energy Innovations Inc.

Revenue and Costs for 2040:

• Revenue: $2,300,000
• G&G Costs: $2,100,000
• Acquisition Costs: $10,000,000
• Exploratory Dry Holes: $12,000,000
• Successful Exploratory Wells: $10,500,000
• Development Wells, Dry: $5,000,000
• Development Wells, Successful: $4,800,000
• Production Facilities: $2,500,000
• Production Costs: $300,000

Amortization for 2040:

• SE: $630,000
• FC: $1,100,000

Accumulated DD&A:

• SE: $1,250,000
• FC: $3,600,000

Required:

1. Prepare income statements for a successful-efforts company and a full-cost company.
2. Prepare unclassified balance sheets for both companies.
3. Explain the difference in net income between the successful-efforts and full-cost companies.