Schefter Mining operates a copper mine in Wyoming
Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, anddevelopment costs totaled $8.2 million. Extraction activities began on July 1, 2011.After the copper is extracted in approximately six years, Schefter is obligated torestore the land to its original condition, including constructing a park. The company?scontroller has provided the following three cash flow possibilities for the restorationcosts:Cash Flow Probability1. $700,000 30%2. $800,000 25%3. $900,000 45%The company?s credit-adjusted, risk-free rate of interest is 5%, and its fiscal year endson December 31.Required:a. What is the initial cost of the copper mine? (Round computations to nearest wholedollar.)b. How much accretion expense will Schefter report in its 2011 income statement?c. What is the carrying value (book value) of the asset retirement obligation thatSchefter will report in its 2011 balance sheet?d. Assume that actual restoration costs incurred in 2017 totaled $860,000. Whatamount of gain or loss will Schefter recognize on retirement of the liability?
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