NATURAL RESOURCE AND INTANGIBLE ACCOUNTING McLeansboro Oil Company acquired an operating oil well during a recent year.

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NATURAL RESOURCE AND INTANGIBLE ACCOUNTING McLeansboro Oil Company acquired an operating oil well during a recent year. The following assets were acquired for $1,350,000 cash.

Asset Fair Value Expected Life Oil well $1,100,000 55,000 barrels Land 85,000 Indefinite Pump 65,000 550,000 barrels Required:

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

. If McLeansboro pumps and sells 11,000 barrels of oil in one year, compute the amount of depletion.

. Prepare journal entries to record depletion for the 11,000 barrels of oil pumped and sold.

. Is the goodwill amortized? Explain your reasoning.

. Why are the land and the pump capitalized separately from the oil well?

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