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nd has incurred the following costs: Prospecting costs Miscellaneous exploration and evaluation costs and purchase costs quipment purchased for extraction

nd has incurred the following costs: Prospecting costs Miscellaneous exploration and evaluation costs and purchase costs quipment purchased for extraction

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Scully Mining Company (SMC) is mining for natural gas in northern British Columbia and has incurred the following costs: Prospecting costs Miscellaneous exploration and evaluation costs Land purchase costs Equipment purchased for extraction Labour related to development and extraction Overhead costs allowed to be allocated to the extraction process Total $55,000 120,000 570,000 135,000 280,000 190,000 $1,350,000 SMC is a public company that reports using the IFRS framework. Which of the following is true regarding the treatment of costs? a) Exploration and evaluation costs of $120,000 must be expensed. b) SMC could capitalize $470,000 as inventory. Equipment purchased for extraction of $135,000 is capitalized as an exploration and evaluation asset. d) The prospecting costs of $55,000 are capitalized as an exploration and evaluation asset.
Transcribed Image Text:Scully Mining Company (SMC) is mining for natural gas in northern British Columbia and has incurred the following costs: Prospecting costs Miscellaneous exploration and evaluation costs Land purchase costs Equipment purchased for extraction Labour related to development and extraction Overhead costs allowed to be allocated to the extraction process Total $55,000 120,000 570,000 135,000 280,000 190,000 $1,350,000 SMC is a public company that reports using the IFRS framework. Which of the following is true regarding the treatment of costs? a) Exploration and evaluation costs of $120,000 must be expensed. b) SMC could capitalize $470,000 as inventory. Equipment purchased for extraction of $135,000 is capitalized as an exploration and evaluation asset. d) The prospecting costs of $55,000 are capitalized as an exploration and evaluation asset.
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