McLeansboro Oil Company acquired a small oil company with only three assets during a recent year. The

Question:

McLeansboro Oil Company acquired a small oil company with only three assets during a recent year. The assets were acquired for $1,350,000 cash.

Required:
1. Record the entry to record this acquisition in McLeansboro€™s journal.
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 equipment capitalized separately from the oil well?

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...