On January 1, 2019, Barbosa Company purchased a coal mining site for $2,000,000. Under the terms of the purchase agreement, Barbosa must restore the site to specified conditions at an estimated future cost of $325,000. Barbosa estimates that it will be able to operate the site for 20 years and will mine 25,000 tons of coal. Barbosa uses a 8% discount rate. In 2019, Barbosa mined 1,000 tons of coal. Question Journal entries to record the purchase of the coal mine would include:
On January 1, 2019, Barbosa Company purchased a coal mining site for $2,000,000. Under the terms of the purchase agreement, Barbosa must restore the site to specified conditions at an estimated future cost of $325,000. Barbosa estimates that it will be able to operate the site for 20 years and will mine 25,000 tons of coal. Barbosa uses a 8% discount rate. In 2019, Barbosa mined 1,000 tons of coal. Question Journal entries to record the purchase of the coal mine would include:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1, 2019, Barbosa Company purchased a coal mining site for $2,000,000. Under the terms of the purchase agreement, Barbosa must restore the site to specified conditions at an estimated future cost of $325,000. Barbosa estimates that it will be able to operate the site for 20 years and will mine 25,000 tons of coal. Barbosa uses a 8% discount rate. In 2019, Barbosa mined 1,000 tons of coal.
Question
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Debit to Coal Mine for $2,325,000 |
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Credit to Asset Retirement Obligation for $325,000 |
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Credit to Asset Retirement Obligation for $69,729 |
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Credit to Cash for $2,069,729 |
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