Exercise 8-19B Computing and recording depletion expense
Fulton Sand and Gravel paid $800,000 to acquire 1,200,000 cubic yards of sand reserves. The following statements model reflects Fulton’s financial condition just prior to purchasing the sand reserves.
The company extracted 650,000 cubic yards of sand in Year 1 and 450,000 cubic yards in Year 2.
Required
a. Compute the depletion charge per cubic yard.
b. Record the acquisition of the sand 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 8-20B Computing and recording goodwill
Horn Co. acquired the business Medical Supply Co. for $275,000 cash and assumed all liabilities at the date of acquisition. Medical’s books showed tangible assets of $250,000, liabilities of $10,000, and equity of $240,000. An appraiser assessed the fair market value of the tangible assets at $265,000 at the date of acquisition. Horn’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. Record the acquisition in general journal format.
Exercise 8-21B Computing and recording the amortization of intangibles
Garth Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items:
Patent with 5 remaining years of legal life $48,000
Goodwill $35,000
Garth’s financial condition just prior to the purchase of these assets is shown in the following statements model:
Required
a. Compute the annual amortization expense for these items if applicable.
b. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model like the preceding one.
c. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for Year 1.
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