Hydro Innovations Inc.

Revenue and Costs for 2044:

• Revenue: $2,700,000
• G&G Costs: $2,500,000
• Acquisition Costs: $12,000,000
• Exploratory Dry Holes: $14,000,000
• Successful Exploratory Wells: $12,500,000
• Development Wells, Dry: $6,000,000
• Development Wells, Successful: $5,800,000
• Production Facilities: $2,900,000
• Production Costs: $340,000

Amortization for 2044:

• SE: $750,000
• FC: $1,300,000

Accumulated DD&A:

• SE: $1,450,000
• FC: $4,400,000

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.