5. Swan Company expected to be extracted from the mine. In Year 1, 90,000 tons are mined. What is the dep
5. Swan Company expected to be extracted from the mine. In Year 1, 90,000 tons are mined. What is the dep
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![### Accounting Questions:
**5. Swan Company purchased a coal mine on January 1, Year 1 for $20,000,000. 640,000 tons of coal are expected to be extracted from the mine. In Year 1, 90,000 tons are mined. What is the depletion expense for Year 1?**
To calculate the depletion expense:
- **Cost of the mine:** $20,000,000
- **Total expected extraction:** 640,000 tons
- **Extraction in Year 1:** 90,000 tons
**Depletion Expense Formula:**
\[
\text{Depletion Expense} = \left( \frac{\text{Cost of the Mine}}{\text{Total Expected Extraction}} \right) \times \text{Extraction in Year 1}
\]
### Calculation:
Depletion rate per ton = $20,000,000 / 640,000 = $31.25 per ton
Depletion expense for Year 1 = $31.25 * 90,000 = $2,812,500
**6. The Alexander Company acquired the Rushmore Company for $9,800,000 cash. The fair value of Village's assets were $8,100,000 and the company had liabilities of $700,000. How much goodwill will be recorded with the acquisition?**
Goodwill is calculated as:
\[
\text{Goodwill} = \text{Purchase Price} - (\text{Fair Value of Assets} - \text{Liabilities})
\]
### Calculation:
Net assets = $8,100,000 - $700,000 = $7,400,000
Goodwill = $9,800,000 - $7,400,000 = $2,400,000
### End of Problems
These questions focus on understanding the calculation of depletion expenses and goodwill during acquisitions, important concepts in accounting and business analysis.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F585e4a80-646c-4418-ada9-cb992a2ce44b%2Ff265d75a-87a6-47a4-b8d4-995da9143574%2F1bn1n2k.jpeg&w=3840&q=75)
Transcribed Image Text:### Accounting Questions:
**5. Swan Company purchased a coal mine on January 1, Year 1 for $20,000,000. 640,000 tons of coal are expected to be extracted from the mine. In Year 1, 90,000 tons are mined. What is the depletion expense for Year 1?**
To calculate the depletion expense:
- **Cost of the mine:** $20,000,000
- **Total expected extraction:** 640,000 tons
- **Extraction in Year 1:** 90,000 tons
**Depletion Expense Formula:**
\[
\text{Depletion Expense} = \left( \frac{\text{Cost of the Mine}}{\text{Total Expected Extraction}} \right) \times \text{Extraction in Year 1}
\]
### Calculation:
Depletion rate per ton = $20,000,000 / 640,000 = $31.25 per ton
Depletion expense for Year 1 = $31.25 * 90,000 = $2,812,500
**6. The Alexander Company acquired the Rushmore Company for $9,800,000 cash. The fair value of Village's assets were $8,100,000 and the company had liabilities of $700,000. How much goodwill will be recorded with the acquisition?**
Goodwill is calculated as:
\[
\text{Goodwill} = \text{Purchase Price} - (\text{Fair Value of Assets} - \text{Liabilities})
\]
### Calculation:
Net assets = $8,100,000 - $700,000 = $7,400,000
Goodwill = $9,800,000 - $7,400,000 = $2,400,000
### End of Problems
These questions focus on understanding the calculation of depletion expenses and goodwill during acquisitions, important concepts in accounting and business analysis.
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