Natural Resource and Intangible Accounting}

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.

\section*{Required:}
1. Record 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. CONCEPTUAL CONNECTION Is the goodwill amortized? Explain your reasoning.
5. CONCEPTUAL CONNECTION Why are the land and the equipment capitalized separately from the oil well?
\section*{OBJECTIVE 10 Problem

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Asset Fair Value Estimated Life Oil $1,125,000 55,000 barrels Land 78,000 Indefinite Equipment 62,000 550,000 barrels