On January 1, 2016 Penn acquired 100% of Teller. The transaction was not a bargain purchase. On the acquisition date, it was determined that Teller had internally-generated patents with a fair value of $40,387,000 that had not been recorded on its financial statements, in accordance with GAAP. The patents were estimated to have a remaining useful life of 15 years as of the acquisition date. What amount should be reported on Teller's consolidated financial statements as of 12/31/2021 for these patents

The answer is b. Debit to Inventory for $275,400.

Explanation:

We have Depletion base is calculated as:

Acquisition cost + Development cost + Restoration cost - Disposal price = 1,500,000 + 360,000 + 180,000 - 510,000 = $1,530,000

=> Depletion rate per one ton of extracted coal = 1,530,000/5,000 = $306

Amount of Depletion recorded in first year with 900 tons extracted = 306 x 900 = $275,400; which will be recorded in the first year as:

Dr Inventory - coal extracted              275,400

Cr Accumulated Depletion                275,400

=> Thus, (b) Debit to Inventory for $275,400 is the correct choice.