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Accounting

NATURAL RESOURCE AND INTANGIBLE ACCOUNTING

McLeansboro Oil Company acquired an operating oil well during a recent year. The fol- lowing assets were acquired for $1,350,000 cash.

Asset	Fair Value	Expected Life
Oil well	$1,100,000	55,000 barrels
Land	85,000	Indefinite
Pump	65,000	550,000 barrels

Required:

1. Write the entry to record this acquisition in McLeansboro's journal. (Hint: Record the cost in excess of fair value as goodwill.)

2. If McLeansboro pumps and sells 11,000 barrels of oil in one year, compute the amount of depletion.

3. Prepare journal entries to record depletion for the 11,000 barrels of oil pumped and sold.

4. Is the goodwill amortized? Explain your reasoning.

5. Why are the land and the pump capitalized separately from the oil well?

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Financial Accounting, Accounting

Category:- Financial Accounting
Reference No.:- M91609259

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