Question

Johnson Oil & Gas sold 12,500 BBLs of oil for the year 2018 at a price per BBL of $48. Revenues and costs
for Johnson Oil & Gas are presented below:
Revenue	$                 825,000
G&G Costs	$                 650,000
Acquisition Costs	$             1,500,000
Exploratory dry holes	$             3,000,000
Successful exploratory wells	$             5,000,000
Development wells, dry	$                 900,000
Development wells, successful	$                 735,000
Production facilities	$                 610,000
Production costs	$                 200,000
	Successful Efforts
Amortization for 2018	$                 200,000
Accumulated DD&A	$                 500,000
Required:
Prepare income statements and unclassified balance sheet for both an SE and FC company, explain the
difference in net income.

Answer 1

Income Statement
Particulars	$
Revenue	8,25,000
Less:
Production cost	2,00,000
Amortization expenses	2,00,000
Depreciation	2,03,333
Net Income	2,21,667
Notes:
1) It is assumed Revenue is including sales and other income also.
2) Capitalised Value and expenses
	Intangible Assets	tangible Assets
	$	$
G&G Cost	6,50,000
Acquisition cost	15,00,000
Exploratory dry holes	30,00,000
Successful Exploratory well	50,00,000
Developed well, dry	9,00,000
Developed well, successful	7,35,000
Production facility		6,10,000
Less: Amortization & Depreciation for 2018	-200000	-2,03,333
	1,15,85,000	4,06,667
* Assumed economic life of production facility is 3 year.
*** depreciation (610000/3) = $ 2,03,333
Partial Balance Sheet
Assets
Intangible Assets	1,15,85,000
PPE	4,06,667
Accumulated DD&A	-5,00,000
Total Assets	1,14,91,667
Total Liabilities & Equity	1,14,91,667