Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,300,000 in 2021 for the mining site and spent an additional $660,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, EVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Cash Outflow $ 360,000 460,000 660,000 Probability 20% 45% 35% 2 3 To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $180,00O. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 12%. Required: 1. Determine the cost of the copper mine. 2. Prepare the journal entries to record the acquisition costs of the mine and the purchase of equipment.

Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,300,000 in 2021 for the mining site and spent an additional $660,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, EVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Cash Outflow $ 360,000 460,000 660,000 Probability 20% 45% 35% 2 3 To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $180,00O. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 12%. Required: 1. Determine the cost of the copper mine. 2. Prepare the journal entries to record the acquisition costs of the mine and the purchase of equipment.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 13P

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Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2021 for the mining site and spent an additional $600,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.): 1 2 3 Cash Outflow $300,000 400,000 600,000 Probability 25% 40% 35% To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $120,000. After the copper is removed from this mine. the equipment will be sold for an estimated residual amount of $20,000. There will be no residual value for the copper mine. The credit-adjusted risk-free rate of interest is 10%. The company…
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2021 for the mining site and spent an additional $600,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: Cash Outflow Probability 1 $ 300,000 25% 2 400,000 40% 3 600,000 35%To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $120,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is…
ackpot Mining Company operates a copper mine in central Montana. The company paid $1,900,000 in 2021 for the mining site and spent an additional $780,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Cash Outflow Probability 1 $ 480,000 15 % 2 580,000 45 % 3 780,000 40 % To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $300,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 12%. Required:1. Determine the cost of the copper mine.2. Prepare the…
ackpot Mining Company operates a copper mine in central Montana. The company paid $1,150,000 in 2021 for the mining site and spent an additional $630,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Cash Outflow Probability 1 $ 330,000 25% 2 430,000 40% 3 630,000 35% To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $230,000. After the copper is removed from this mine, the equipment will be sold for an estimated residual amount of $24,000. There will be no residual value for the copper mine. The credit-adjusted risk-free rate…
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,900,000 in 2021 for the mining site and spent an additional $780,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Cash Outflow Probability 1 $ 480,000 15 % 2 580,000 45 % 3 780,000 40 % To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $300,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 12%. Required:1. Determine the cost of the copper mine.2. Prepare the…
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,950,000 in 2024 for the mining site and spent an additional $790,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: Use (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Cash Outflow Probability 1 $ 490,000 25% 2 590,000 40% 3 790,000 35% To aid extraction, Jackpot purchased some new equipment on July 1, 2024, for $310,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 10%. 1. Determine the cost of the copper mine. 2. Prepare the journal entries to record the acquisition costs of the mine and the purchase of…
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2016 for the mining site and spent an additional $600,000 to prepare the mine for the extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: Cash Outflow Probability 1 $300,000 25% 2 400,000 40% 3 600,000 35% Jackpot purchased some new equipment on July 1, 2016, to aid extraction for $120,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 10%. Required: 1. Determine the cost of the copper mine. 2. Prepare the journal entries to record the acquisition costs of the mine and the purchase of equipment
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,450,000 in 2021 for the mining site and spent an additional $690,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1 $ 2 Cash Outflow 3 Probability 390,000 490,000 690,000 25% 45% 30% To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $140,000. After the copper is removed from this mine, the equipment will be sold for an estimated residual amount of $31,000. There will be no residual value for the copper mine. The credit-adjusted risk-free rate of interest is 10%. The…
Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $7.5 million. Extraction activities began on July 1, 2024. After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The company's controller has provided the following three cash flow possibilities for the restoration costs: 1. 2. 3. Cash Flow $ 630,000 730,000 830,000 Probability 38% 30% 40% The company's credit-adjusted, risk-free rate of interest is 4%, and its fiscal year ends on December 31. Note: Use appropriate factor(s) from the tables provided. Round other intermediate calculations to the nearest whole dollar. Enter your answers in whole dollars. (FV of $1, PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. What is the initial cost of the copper mine? 2. How much accretion expense will Schefter report in its 2024 income statement? 3. What is the book…
Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $7.5 million. Extraction activities began on July 1, 2024. After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The company's controller has provided the following three cash flow possibilities for the restoration costs: 1. 2. 3. Cash Flow $ 630,000 730,000 830,000 Probability 30% 30% 40% The company's credit-adjusted, risk-free rate of interest is 4%, and its fiscal year ends on December 31. Note: Use appropriate factor(s) from the tables provided. Round other intermediate calculations to the nearest whole dollar. Enter your answers in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. What is the initial cost of the copper mine? 2. How much accretion expense will Schefter report in its 2024 income statement? 3. What is the book…
In 2021, the Marion Company purchased land containing a mineral mine for $1,600,000. Additional costs of $600,000 were incurred to develop the mine. Geologists estimated that 400,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $100,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $150,000. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $80,000 was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $4,000 after the mining project is completed. In 2021, 50,000 tons of ore were extracted and sold. In 2022, the estimate of total tons of ore in the mine was revised from 400,000 to 487,500. During 2022, 80,000 tons were extracted, of which 60,000 tons were…
In 2021, the Marion Company purchased land containing a mineral mine for $1,740,000. Additional costs of $676,000 were incurred to develop the mine. Geologists estimated that 400,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $116,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $184,000. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $96,000 was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $4,000 after the mining project is completed. In 2021, 60,000 tons of ore were extracted and sold. In 2022, the estimate of total tons of ore in the mine was revised from 400,000 to 451,000. During 2022, 96,000 tons were extracted. Required: 1. Compute…