Smart Energy Innovations Inc.

Revenue and Costs for 2051:

• Revenue: $3,400,000
• G&G Costs: $3,200,000
• Acquisition Costs: $15,500,000
• Exploratory Dry Holes: $17,500,000
• Successful Exploratory Wells: $16,000,000
• Development Wells, Dry: $7,800,000
• Development Wells, Successful: $7,500,000
• Production Facilities: $3,600,000
• Production Costs: $410,000

Amortization for 2051:

• SE: $960,000
• FC: $1,650,000

Accumulated DD&A:

• SE: $1,800,000
• FC: $5,800,000

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.