Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,200,000 in 2024 for the mining site and spent an additional $640,000 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: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Cash Outflow 1 2 $ 340,000 440,000 3 Probability 15% 45% 40% 640,000 To aid extraction, Jackpot purchased some new equipment on July 1, 2024, for $160,000. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the cost of the copper mine. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar. Cost of copper mine
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,200,000 in 2024 for the mining site and spent an additional $640,000 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: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Cash Outflow 1 2 $ 340,000 440,000 3 Probability 15% 45% 40% 640,000 To aid extraction, Jackpot purchased some new equipment on July 1, 2024, for $160,000. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the cost of the copper mine. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar. Cost of copper mine
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,200,000 in 2024 for the mining site and
spent an additional $640,000 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:
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Cash Outflow
1
2
$ 340,000
440,000
3
Probability
15%
45%
40%
640,000
To aid extraction, Jackpot purchased some new equipment on July 1, 2024, for $160,000. 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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Determine the cost of the copper mine.
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar.
Cost of copper mine
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