NATURAL RESOURCE AND INTANGIBLE ACCOUNTING In 2002, the Mudcat Gas Company purchased a natural gas field in Oklahoma for

$158,000,000. The fair value of the land was $1,500,000 and the fair value of the natural gas reserves was $156,217,500. At that time, estimated recoverable gas was 104,145,000 cubic feet.

Required:

. Write the entry to record this acquisition in Mudcat’s journal. (Hint: Record the cost in excess of fair value as goodwill.)

. If Mudcat recovers and sells 2,500,000 cubic feet in one year, compute the depletion.

. Prepare journal entries to record depletion for the 2,500,000 cubic feet of natural gas recovered and sold.

. Is the goodwill amortized? Explain your reasoning.

. Why is the land capitalized separately from the natural gas reserves?