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 Apr. 1, 2023 Account Titles and Explanation Mineral Resources e Textbook Asset Retirement Obligation Cash eTextbook and Media List of Accounts Your answer is partially correct. Debit 6079837 Credit 292837 5787000 Assistance Used Assistance Used Attempts: 3 of 3 used Prepare any journal entries required for the mine (straight-line depreciation) and the asset retirement obligation at December 31, 2023. The estimated residual value of the mine is zero. (Round answers to O decimal places, e.g. 5,275. 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.)
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 Apr. 1, 2023 Account Titles and Explanation Mineral Resources e Textbook Asset Retirement Obligation Cash eTextbook and Media List of Accounts Your answer is partially correct. Debit 6079837 Credit 292837 5787000 Assistance Used Assistance Used Attempts: 3 of 3 used Prepare any journal entries required for the mine (straight-line depreciation) and the asset retirement obligation at December 31, 2023. The estimated residual value of the mine is zero. (Round answers to O decimal places, e.g. 5,275. 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text: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 Titles and Explanation
Apr. 1,
2023
eTextbook
Mineral Resources
Asset Retirement Obligation
eTextbook and Media
Cash
List of Accounts
Your answer is partially correct.
Dec.
31,
2023
Date Account Titles and Explanation
Dec.
31,
2023
Depreciation Expense
Accumulated Depreciation - Mineral Resources
(To record depletion for the year)
Accretion Expense
Prepare any journal entries required for the mine (straight-line depreciation) and the asset retirement obligation at December 31,
2023. The estimated residual value of the mine is zero. (Round answers to O decimal places, e.g. 5,275. 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.)
Asset Retirement Obligation
Debit
(To record accretion expense for the year)
6079837
Debit
578700
Credit
14642
292837
5787000
Assistance Used
Assistance Used
Attempts: 3 of 3 used
Credit
578700
14642
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