Question

14.During 2017, Bolton Corporation acquired a mineral mine for $1,400,000 of which $100,000 was determined to be the salvage value of the land after the mineral has been removed. Geological surveys have indicated that 13 million units of the mineral could be extracted. During 2017, 1,500,000 units were extracted and 1,200,000 units were sold. What is the amount of depletion affecting the 2017 income statement?

Select one:

a. $140,000

b. $150,000

c. $138,000

d. $156,000

e. $120,000

15.

Which item(s) result in Goodwill to be included on a balance sheet?

Select one:

a. Both the excess of the purchase price over a purchased company’s net assets and internally generated goodwill.

b. Neither the excess of the purchase price over a purchased company’s net assets nor internally generated goodwill.

c. The excess of the purchase price over a purchased company’s net assets, but not internally generated goodwill.

d. Internally generated goodwill, but not the excess of the purchase price over a purchased company’s net assets.

17.

Blue Sky Company’s 12/31/08 balance sheet reports assets of $5,000,000 and liabilities of $2,000,000. All of Blue Sky’s assets’ book values approximate their fair value, except for land, which has a fair value that is $300,000 less than its book value. On 12/31/08, Aaron Corporation paid $5,100,000 to acquire Blue Sky. What amount of goodwill should Aaron record as a result of this purchase?

Select one:

a. $2,400,000

b. $100,000

c. $1,800,000

d. $2,000,000

e. $2,100,000

Answer 1

Answer-14-

Cost of Mineral Mine	$ 1,400,000
Less:-Ascribed Land Value	$ 100,000
Depletionable Value	$ 1,300,000

No of units can be extracted from Mine	13,000,000	units
No of units Sold	1,200,000	units
Depletion Value	$ 120,000
(1,300,000/13,000,000*1,200,000)

Hence, the correct option is e-$120,000.

15-The correct option is-c-The excess of the purchase price over a purchased company’s net assets, but not internally generated goodwill.

16-The correct option is c-$1,800,000

Explanation:-

Goodwill is the amount paid in excess of the fair value of assets less liabilities.

So here we have (5,000,000+300,000-2,000)= 3,300,000

Since they paid 5,100,000 goodwill would be 5,100,000- 3,300,000= 1,800,000.