Wave Innovations Ltd.

Revenue and Costs for 2048:

• Revenue: $3,100,000
• G&G Costs: $2,900,000
• Acquisition Costs: $14,000,000
• Exploratory Dry Holes: $16,000,000
• Successful Exploratory Wells: $14,500,000
• Development Wells, Dry: $7,000,000
• Development Wells, Successful: $6,800,000
• Production Facilities: $3,300,000
• Production Costs: $380,000

Amortization for 2048:

• SE: $870,000
• FC: $1,500,000

Accumulated DD&A:

• SE: $1,650,000
• FC: $5,200,000

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.