Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 13, Problem 3JC
To determine
The amount the company should recognize related to its asset retirement obligation.
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Problem J:
On January 1, 2021, the Reddick Company purchased a mining right for P30,000,000. The mine's recoverable ore reserves are estimated to be 4,000,000 tons.
Following the extraction of all ore, the company will be obligated by law to return the land to its original state. The present value of the restoration cost is P2,000,000. The company estimated that the property may be sold for P5,000,000. At a cost of P6,000,000, roads were built and other development costs were invested to aid in the extraction and transportation of the mined ore in early 2021. 200,000 tons of ore were extracted and sold in 2021.
A new study conducted by a new mining engineer on December 31, 2022, revealed that 5,000,000 tons of ore were available for mining. 225,000 tons of ore were mined and sold in 2022.
How much depletion expense should be recognized in 2022?
DMH Industries Limited purchased a strip mine for cash on April 1, 2023 at a cost of $5,787,000. DMH expects to operate the mine
for 10 years, at which it is legally required to restore the surrounding area to its original state. It is estimated that it will cost $477,000
to do this at the end of the mine's useful life. The company's year-end is December 31, and DMH follows ASPE.
(a)
Your Answer Correct Answer
Your answer is correct.
Prepare the journal entry to record the purchase of the mine and to record the asset retirement obligation for the mine on April 1,
2023. Based on the effective interest rate of 5%, the present value of the asset retirement obligation (i.e., its fair value) on the
date of acquisition is $292,837. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.
List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
(b)
Date Account…
Problem 8No Control Mining purchased land on February 1, 2019, at a cost of P1,250,000. It estimated that a total of 60,000 tons of mineral was available for mining. After it has removed all the mineral resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the fair value of this restoration obligation at P90,000. It believes it will be able to sell the property afterwards for P100,000. It incurred developmental costs of P200,000 before it was able to do any mining. In 2019, resources removed totaled 30,000 tons. The company sold 24,000 tons.RequiredCompute the following information for 2019.a. Per unit mineral cost.b. Total material cost of December 31, 2019, inventory.c. Total materials cost in cost of goods sold at December 31, 2019.
Chapter 13 Solutions
Intermediate Accounting (2nd Edition)
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - Prob. 13.3QCh. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.1MCCh. 13 - Prob. 13.2MCCh. 13 - Prob. 13.3MCCh. 13 - Medical Services Inc allows employees at the end...Ch. 13 - Trade Notes Payables. On February 1, Seville...Ch. 13 - Unearned Revenues. On June 1 of the current year,...Ch. 13 - Unearned Revenues. GoSnow Inc. provides snow...Ch. 13 - Prob. 13.4BECh. 13 - Prob. 13.5BECh. 13 - Prob. 13.6BECh. 13 - Sales Taxes Payable. Kloth Fabric Store operates...Ch. 13 - Prob. 13.8BECh. 13 - Prob. 13.9BECh. 13 - Prob. 13.10BECh. 13 - Asset Retirement Obligation at Acquisition. On...Ch. 13 - Prob. 13.12BECh. 13 - Asset Retirement Obligation, Disposal. Buckner...Ch. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Warranty Liability, Assurance-Type Warranty,...Ch. 13 - Prob. 13.19BECh. 13 - Prob. 13.20BECh. 13 - Trade Notes Payable. On November 1, Barcelona...Ch. 13 - Unearned Revenues. On May 1 of the current year,...Ch. 13 - Gift Cards. Diamond Depot sold 57,000 of gift...Ch. 13 - Sales Taxes Payable. Eaton Technology operates...Ch. 13 - Prob. 13.5ECh. 13 - Asset Retirement Obligation. On January 1,...Ch. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Accounting for Premiums. Supergreen Grocers, Inc....Ch. 13 - Prob. 13.13ECh. 13 - Payroll Taxes Payable, Pay Exceeds. Wage Base....Ch. 13 - Current Operating Liabilities. James Stores, Inc....Ch. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Payroll Taxes Payable. Jackson Corporation employs...Ch. 13 - Prob. 1JCCh. 13 - Prob. 2JCCh. 13 - Prob. 3JCCh. 13 - Financial Statement Analysis Case You are...Ch. 13 - Surfing the Standards Case 1: Environmental...Ch. 13 - Prob. 2SSCCh. 13 - Prob. 1BCC
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