Exercise 8-19A Computing and recording depletion expense
Colorado Mining paid $600,000 to acquire a mine with 40,000 tons of coal reserves. The following statements model reflects Colorado Mining’s financial condition just prior to purchasing the coal reserves. The company extracted 15,000 tons of coal in Year 1 and 18,000 tons in Year 2.
Required
a. Compute the depletion charge per unit.
b. Record the acquisition of the coal reserves and the depletion expense for Years 1 and 2 in a financial statements model like the preceding one.
c. Prepare the general journal entries to record the depletion expense for Years 1 and 2.
Exercise 8-20A Computing and recording goodwill
Arizona Corp. acquired the business Data Systems for $320,000 cash and assumed all liabilities at the date of purchase. Data’s books showed tangible assets of $260,000, liabilities of $40,000, and stockholders’ equity of $220,000. An appraiser assessed the fair market value of the tangible assets at $250,000 at the date of acquisition. Arizona Corp.’s financial condition just prior to the acquisition is shown in the following statements model:
Required
a. Compute the amount of goodwill acquired.
b. Record the acquisition in a financial statements model like the preceding one.
c. When will the goodwill be written off under the impairment rules?
d. Record the acquisition in general journal format.
Exercise 8-21A Computing and recording the amortization of intangibles
Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items:
- Patent with 4 remaining years of legal life: $40,000
- Goodwill: $35,000
Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model:
Required
a. Compute the annual amortization expense for these items.
b. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model like the one shown earlier.
c. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for Year 1.
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