Question

Given are the revenue and costs for Lease A, all incurred during the year:  

Acquisition Costs $30,000

G&G costs $80,000

Exploratory dry holes $1,500,000

Successful exploratory holes $350,000

Development wells, dry $200,000

Development wells, successful $475,000

Cost of production facilities $250,000

Production costs $60,000

DD&A* 55,000 (SE): $125,000 (FC)

Accumulated DD&A $150,000 (SE); $360,000 (FC)

Revenue from sale of oil $225,000   

*Depreciation, depletion, amortization

1. Indicate whether each of the above items will appear in

(a) Income Statement – Successful Efforts (IS-SE)

(b) Income Statement – Full Cost (IS-FC)

(c) Balance Sheet – Successful Efforts (BS-SE)

(d) Balance Sheet – Full Cost (BS-FC)

2. What are the totals for each of the above columns?

Answer 1

Answer is attached below

Answer 1(a) Income Statement-Successful Efforts (IS-SE) Answer 1(b) Income Statement - Full Cost (IS-FC) Amount ($) 225,000 Amount ($) 225,000 Revenues Less: Expenses G&G costs Exploratory dry holes Production costs DD&A Total Expenses Net Income 80,000 1,500,000 60,000 55,000 1,695,000 (1,470,000) Revenues Less: Expenses G&G costs Exploratory dry holes Production costs DD&A Total Expenses Net Income 60,000 125,000 185,000 40,000 Answer 1(c) Balance Sheet-Successful Efforts (BS-SE) Balance Sheet - Full Cost (BS-FC) 30,000 G&G Costs Acquisition Costs Exploratory dry holes Successful exploratory holes Development costs Total Assets Less: Accumulated DD&A Net Assets 350,000 475,000 855,000 (150,000) 705,000 G&G Costs Acquisition Costs Exploratory dry holes Successful exploratory holes Development costs Total Assets Less: Accumulated DD&A Net Assets 80,000 30,000 1,500,000 350,000 475,000 2,435,000 (360,000) 2,075,000 Answer 2 Totals for each colums computed above