On the last day of the fiscal year, the chief financial officer of MultiPlex Industries is reviewing several accounting matters. They are as follows:

1. Equipment purchased seven years ago at a cost of $450,000 was sold yesterday as scrap metal at a price of $3,000. It had originally been estimated to have a 10-year life with a $50,000 residual value. The straight-line method has been used.

2. Early in the current year, the mineral rights to a bauxite mine were acquired at a cost of $5.5 million. Mining consultants have estimated there are about 350,000 tons of recoverable ore that can be removed and processed.

3. Just yesterday, the company purchased a subsidiary company by paying the $2.8 million purchase price. Investigation prior to the acquisition reveals the market value of the subsidiary’s identifiable assets totals $1.9 million.

Required

Use the format presented in this chapter for parts A, B, C, and E.

A. Prepare the entry to record the current year’s depreciation expense.

B. Prepare the entry to record yesterday’s sale of old machinery. Also show how you arrived at the amounts you entered.

C. During the year just ended, 77,000 tons of bauxite ore was removed, processed, and sold from the mine. Prepare the appropriate entry to record the expense.

D. Explain what goodwill represents.

E. Prepare the entry to record the purchase of the subsidiary.