QUESTION 2 Partially 2.00 paints out of 142.00 F Flag question Successful Efforts versus Full Cost Method Barrett Oil and Gas Company was about to embark on a 50-well exploration program in Texas and Louisiana on January 1, 2011. The CEO estimated that the average cost to drill a well would run $800,000 per well, with a resulting success ratio of 60 percent (30 wells were expected to yield commercially viable quantities of oil while 20 wells were expected to be commercially unproductive). n aggregate, the CEO estimated that the 30 successful wells would yield 10 million barrels of oil, to be extracted at the following rates stimated Pel Barrel Production Selling Lifting Year (in barrels) Price Cost 000,000 $30 $5 2012 500,000 2013 500,000 35 2014 2,500,000 40 2015 3,500,000 45 0,000,000 The CEO of Barrett Oil and Gas Company was concerned about how the accounting for the exploration project would affect the firms overall reported results The exploration program would be financed with a $40 million bank loan on January 1,2011, at an interest rate of 10 percent per year on the balance of the loan outstanding as of the beginning of the year The loan would be repaid in 4 installments of $10 million per year, with the first payment occurring on December 31, 2012. Required Assume that this is the company's only exploration project. Prepare the firm's income statements and balance sheets for 2011 through 2015 assuming the use of 1. The full cost method. Round answers to nearest one decimal place. Enter all values as positive numbers. 20 s 30,000,000 X s 0 X o X Rev Lifting costs Exploration costs expense Depletion expense 0 X s 0 X o X ncarne before tax Balance Sheet (in millions) 2011 2012 2013 2014 2015 Assets oil reserves ulated depleti o x s 0 X s To Liabilities & Shareholders' Equity Bank loan etained earnings QUESTION 2 Partially 2.00 paints out of 142.00 F Flag question Successful Efforts versus Full Cost Method Barrett Oil and Gas Company was about to embark on a 50-well exploration program in Texas and Louisiana on January 1, 2011. The CEO estimated that the average cost to drill a well would run $800,000 per well, with a resulting success ratio of 60 percent (30 wells were expected to yield commercially viable quantities of oil while 20 wells were expected to be commercially unproductive). n aggregate, the CEO estimated that the 30 successful wells would yield 10 million barrels of oil, to be extracted at the following rates stimated Pel Barrel Production Selling Lifting Year (in barrels) Price Cost 000,000 $30 $5 2012 500,000 2013 500,000 35 2014 2,500,000 40 2015 3,500,000 45 0,000,000 The CEO of Barrett Oil and Gas Company was concerned about how the accounting for the exploration project would affect the firms overall reported results The exploration program would be financed with a $40 million bank loan on January 1,2011, at an interest rate of 10 percent per year on the balance of the loan outstanding as of the beginning of the year The loan would be repaid in 4 installments of $10 million per year, with the first payment occurring on December 31, 2012. Required Assume that this is the company's only exploration project. Prepare the firm's income statements and balance sheets for 2011 through 2015 assuming the use of 1. The full cost method. Round answers to nearest one decimal place. Enter all values as positive numbers. 20 s 30,000,000 X s 0 X o X Rev Lifting costs Exploration costs expense Depletion expense 0 X s 0 X o X ncarne before tax Balance Sheet (in millions) 2011 2012 2013 2014 2015 Assets oil reserves ulated depleti o x s 0 X s To Liabilities & Shareholders' Equity Bank loan etained earnings