steveIncorporated purchased all of the outstanding stock of Red Baron

Company for $950,000 cash. Snoopy assumed all of the liabilities. The book and

fair values of Red Baron's assets and liabilities at the date of acquisition were:

Book Value, Fair Value

Current assets (net) $130,000 (BV) $125,000 (FV)

Property, plant, equip. (net) 600,000(BV) 750,000(FV)

Liabilities 150,000 (BV) 175,000(FV)

steve Incorporated would record goodwill of:

A) $250,000

B) $75,000

C) $445,000

D) $0

Lou Incorporated exchanged land and paid $22,000 cash for new

equipment. The book value of the land was $82,000 and the fair value of the land was

$95,000 at the time of the exchange. The exchange has commercial substance. The

amount at which Lou would record the new equipment in her accounting

records is:

A) $117,000

B) $104,000

C) $95,000

D) $82,000

Baby Mining Company paid $2,000,000 to obtain the rights to operate a coal mine.

Costs of exploring for the coal deposit totaled $1,500,000 and development costs of $5,000,000

were incurred in preparing the mine for extraction activities. Baby also purchased some new

mining equipment for $200,000 to be used for extracting coal from the mine. After the coal is

extracted in approximately five years, Baby mining company is obligated to restore the land to its

original condition. Baby credit-adjusted, risk-free rate of interest is 7%. The company's

engineer has provided the following three cash flow possibilities for the future restoration costs:

Cash Flow Probability

$1,000,000 10%

1,400,000 60%

1,800,000 30%

The total capitalized cost of the coal mine is closest to:

A) $8,500,000

B) $9,555,225

C) $8,700,000

D) $9,980,000

. Total accretion expense recognized over the five year mining period is closest to:

A) $1,480,000

B) $424,775

C) $624,775

D) $0