Answered: re the lands affected by its mining…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 13P

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On January 1, 2020 Machu, Inc. acquired mining rights near Cordillera for P20,000,000 for 10 years, there was no cash payment, instead Mach issued a 2-year non-interest bearing note. Since the Company's inception in 1956, the Company continued to restore the lands affected by its mining activities. Management Expects restoration costs to be P2,000,000. Discount rates for similar instruments are as follows: 8% for 2 years and 12% for 10 years. On December 21, 2020, Machu was being sued by one of another corporation over a patent infringement. The Company's legal counsel finds it probable that Machu will be liable for P2,000,000 damages. Machu has a P5,000,000 comprehensive insurance which covers these type of situations. The insurance has a P300,000 deductible clause. How much is the total current liabilities as of December 31,2020

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