Energy Innovations Ltd.

Revenue and Costs for 2043:

• Revenue: $2,600,000
• G&G Costs: $2,400,000
• Acquisition Costs: $11,500,000
• Exploratory Dry Holes: $13,500,000
• Successful Exploratory Wells: $12,000,000
• Development Wells, Dry: $5,800,000
• Development Wells, Successful: $5,500,000
• Production Facilities: $2,800,000
• Production Costs: $330,000

Amortization for 2043:

• SE: $720,000
• FC: $1,250,000

Accumulated DD&A:

• SE: $1,400,000
• FC: $4,200,000

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.