Brief Exercise 10-5 (Algo) Asset retirement obligation [LO10-1] Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $5.8 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $520,000, 20% probability; (2) $570,000, 35% probability; and (3) $670,000, 45% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the book value of the asset retirement liability at the end of one year? Assuming that the actual restoration costs incurred after five years are $616,000, what amount of gain or loss will Smithson recognize on retirement of the liability? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in dollars not in millions of dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) Liability

Brief Exercise 10-5 (Algo) Asset retirement obligation [LO10-1] Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $5.8 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $520,000, 20% probability; (2) $570,000, 35% probability; and (3) $670,000, 45% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the book value of the asset retirement liability at the end of one year? Assuming that the actual restoration costs incurred after five years are $616,000, what amount of gain or loss will Smithson recognize on retirement of the liability? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in dollars not in millions of dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) Liability

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

4
Question 12 research laboratory which requires P5,000, 000 for original Determine the capitalized cost of construction; P100, 000 at the end of every year for the first 5 years and then P120, 000 each year thereafter f or operating expenses, and P500,000 every 6 years for replacement of equipment with interest at 12% per annum? OA6,441,350 O B.6,067,015 OC 6,632,445 8,573,650ס E, None of the above Question 12 of 50 A Moving to another question will save this response. acer PrtSc Pause Del Home Pg U F7 F8 F9 F10 F11 F12 F3 F4 F5 F6 SysRq Scr Lk Break Ins DIO Backspace 7 8.
f5 Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $9.11 million, and the equipment has a useful life of 7 years with a residual value of $1,200,000. The company will use straight- line depreciation. Beacon could expect a production increase of 44,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 71,000 units Proposed (automation) 115,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $ 90 $ ? $ 90 $ ? Variable costs Direct materials $ 16 $ 16 Direct labor 15 ? Variable manufacturing overhead 9 Contribution margin Total variable manufacturing costs Fixed manufacturing costs 40 གནྡྷ $ 50 ? $53 ? Net operating income $ 1,130,000 ? $ 2,330,000 ? 4. Using a discount rate of 15 percent, calculate the net present value (NPV) of the proposed investment.…
9
Subject: accounting
Natural Resources SE7. Walden Green Company purchased land containing an estimated 4,000,000 tons of ore for $16,000,000. The land will be worth $2,400,000 without the ore after 8 years of active mining. Although the equipment needed for the mining will have a useful life of 20 years, it is not expected to be usable and will have no value after the mining on this site is complete. Compute the depletion charge per ton and the amount of deple- tion expense for the first year of operation, assuming that 600,000 tons of ore are mined and sold. Also, compute the first-year depreciation on the mining equipment using the production method, assuming a cost of $19,200,000 with no residual value.
Subject: accounting
Ind
Subject : Accounting
None
9
Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2) Perit Industries has $165,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 305,000 50 $ 21,000 1. Nat present valus project A 2. Net present value project B 3. Which investment alternative of either) would you recommend that the company accept? Project 8 $ 165,000 $ 56,000 years The working capital needed for project will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factors) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2.…