Wildhorse Products Limited leases property on which copper has been discovered. The lease provides for an immediate payment of $471,700 to the lessor before drilling has begun and an annual rental of $54,920. In addition, the lessee is responsible for cleaning u the waste and debris from drilling and for the costs of reconditioning the land for farming when the mine is abandoned. It is estimate that the legal obligation related to cleanup and reconditioning has a present value of $45,970. Wildhorse Products has publicly pledged an additional $29,980 (present value) to reclaim the area surrounding the mine. Wildhorse Products prepares financial statements in accordance with IFRS. Your answer is incorrect. Determine the amount that should be capitalized in the Mineral Resources asset account as a result of the lease agreement. Amount capitalized $ eTextbook and Media Your answer is incorrect. Determine the amount that should be capitalized in the Mineral Resources asset account as a result of the lease agreement, assuming Wildhorse Products prepares financial statements in accordance with ASPE. Amount capitalized $

Wildhorse Products Limited leases property on which copper has been discovered. The lease provides for an immediate payment of $471,700 to the lessor before drilling has begun and an annual rental of $54,920. In addition, the lessee is responsible for cleaning u the waste and debris from drilling and for the costs of reconditioning the land for farming when the mine is abandoned. It is estimate that the legal obligation related to cleanup and reconditioning has a present value of $45,970. Wildhorse Products has publicly pledged an additional $29,980 (present value) to reclaim the area surrounding the mine. Wildhorse Products prepares financial statements in accordance with IFRS. Your answer is incorrect. Determine the amount that should be capitalized in the Mineral Resources asset account as a result of the lease agreement. Amount capitalized $ eTextbook and Media Your answer is incorrect. Determine the amount that should be capitalized in the Mineral Resources asset account as a result of the lease agreement, assuming Wildhorse Products prepares financial statements in accordance with ASPE. Amount capitalized $

Business Its Legal Ethical & Global Environment

10th Edition

ISBN:9781305224414

Author:JENNINGS

Publisher:JENNINGS

Chapter11: Environmental Regulation And Sustainability

Section: Chapter Questions

Problem 9QAP

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Sheridan Products Limited leases property on which copper has been discovered. The lease provides for an immediate payment of $471,500 to the lessor before drilling has begun and an annual rental of $54,720. In addition, the lessee is responsible for cleaning up the waste and debris from drilling and for the costs of reconditioning the land for farming when the mine is abandoned. It is estimated that the legal obligation related to cleanup and reconditioning has a present value of $45,500. Sheridan Products has publicly pledged an additional $29,780 (present value) to reclaim the area surrounding the mine. Sheridan Products prepares financial statements in accordance with IFRS. Determine the amount that should be capitalized in the Mineral Resources asset account as a result of the lease agreement, assuming Sheridan Products prepares financial statements in accordance with ASPE. Amount capitalized $ 546780
am. 46.
Sunset Mountain Mining paid $362,300 for the right to extract mineral assets from a 350,000-ton deposit. In addition to the purchase price, Sunset also paid a $300 filing fee, a $2,400 license fee to the state of Nevada, and $55,000 for a geological survey of the property. Because Sunset purchased the rights to the minerals only and did not purchase the land, it expects the asset to have zero residual value. During the first year, Sunset removed and sold 40,000 tons of the minerals. Make journal entries to record (a) purchase of the minerals (debit Minerals), (b) payment of fees and other costs, and (c) depletion for the first year. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
Lakeland Mountain Mining paid $627,300 for the right to extract mineral assets from a 550,000-ton deposit. In addition to the purchase price, Lakeland also paid a $800 filing fee, a $1,900 license fee to the state of Nevada, and $85,000 for a geological survey of the property. Because Lakeland purchased the rights to the minerals only and did not purchase the land, it expects the asset to have zero residual value. During the first year, Lakeland removed and sold 60,000 tons of the minerals. Make journal entries to record (a) purchase of the minerals (debit Minerals), (b) payment of fees and other costs, and (c) depletion for the first year. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing (a) the purchase of the minerals (debit Mineral asset). (Do not record payment for any additional costs associated with the minerals. We will do this in entry b.) Date Accounts and Explanation a. Debit Credit
Sierra Mountain Mining paid $607,000 for the right to extract mineral assets from a 350,000-ton deposit. In addition to the purchase price, Sierra also paid a $700 filing fee, a $2,300 license fee to the state of Nevada, and $55,000 for a geological survey of the property. Because Sierra purchased the rights to the minerals only and did not purchase the land, it expects the asset to have zero residual value. During the first year, Sierra removed and sold 50,000 tons of minerals. Make journal entries to record (a) purchase of the minerals (debit Minerals), (b) payment of fees and other costs, and (c) depletion for the first year. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) G Begin by journalizing (a) the purchase of the minerals (debit Mineral asset). (Do not record payment for any additional costs associated with the minerals. We will do this in entry b.) Date Accounts and Explanation a. Debit Credit
Gage Co. purchases land and constructs a service station and car wash for a total of P540,000. At January 2, 2018, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for P600,000 and immediately leased from the oil company by Gage. Fair value of the land at time of the sale was P60,000. The lease is a 10-year, noncancellable lease. Gage uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Gage at termination of the lease. A partial amortization schedule for this lease is as follows: Payment Interest Amortization Balance Jan. 2, 2018 600,0000 Dec. 31, 2018 97,646.71 60,000.00 37,646.71 562,353.29 Dec. 31, 2019 97,646.71 56,235.33 41,411.38 520,941.91 Dec. 31, 2020 97,646.71 52,094.19 45,552.52 475,389.39 From the…
Gage Co. purchases land and constructs a service station and car wash for a total of P540,000. At January 2, 2018, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for P600,000 and immediately leased from the oil company by Gage. Fair value of the land at time of the sale was P60,000. The lease is a 10-year, noncancellable lease. Gage uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Gage at termination of the lease. A partial amortization schedule for this lease is as follows: Payment Interest Amortization Balance Jan. 2, 2018 600,0000 Dec. 31, 2018 97,646.71 60,000.00 37,646.71 562,353.29 Dec. 31, 2019 97,646.71 56,235.33 41,411.38 520,941.91 Dec. 31, 2020 97,646.71 52,094.19 45,552.52 475,389.39 The total lease-related income recognized by the lessee during…
Cullumber Co. purchases land and constructs a service station and car wash for a total of $487500. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $560000 and immediately leased from the oil company by Cullumber. Fair value of the land at time of the sale was $56000. The lease is a 10-year, noncancelable lease. Cullumber uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Cullumber at termination of the lease. A partial amortization schedule for this lease is as follows: Payments Interest Amortization Balance Jan. 2, 2021 $560000 Dec. 31, 2021 $91137.42 $56000 $35137.42 524862.58 Dec. 31, 2022 91137.42 52486.26 38651.16 486211.42 Dec. 31, 2023 91137.42 48621.14 42516.28 443695.14 What is the…
Us Oil Company acquired property rights to search for natural resources on land that it is convinced has oil reserves, for $15,418,620. The contract requires that Oriole restore the property to a status usable for a park after drilling and extraction are complete. The estimated cost of this restoration is $2,363,000. Oriole incurs exploration costs of $1,335,000 and intangible development costs of $1,770,000. Geological surveys suggest that approximately 1,113,000 barrels of oil can be extracted from the site. In 2025, Oriole extracts 248,000 barrels of oil. What journal entry is required to record the extraction of the oil for the first year?
Murphy Mining Company recently purchased a quartz mine that it intends to work for the next 10 years. According to state environmental laws, Murphy must restore the mine site to its original natural prairie state after it ceases mining operations at the site. To properly account for the mine, Murphy must estimate the fair value of this asset retirement obligation. This amount will be recorded as a liability and added to the value of the mine on Murphy’s books. (You will learn more about these asset retirement obligations in Chapters 10 and 13.) There is no active market for retirement obligations such as these, but Murphy has developed the following cash flow estimates based on its prior experience in mining-site restoration. It will take 3 years to restore the mine site when mining operations cease in 10 years. Each estimated cash outflow reflects an annual payment at the end of each year of the 3-year restoration period. Restoration EstimatedCash Outflow ProbabilityAssessment…
Pharoah Co. purchases land and constructs a service station and car wash for a total of $480000. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $520000 and immediately leased from the oil company by Pharoah. Fair value of the land at time of the sale was $48000. The lease is a 10-year, noncancelable lease. Pharoah uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Pharoah at termination of the lease. A partial amortization schedule for this lease is as follows: Payments Interest Amortization Balance Jan. 2, 2021 $520000.00 Dec. 31, 2021 $84627.61 $52000.00 $32627.61 487372.39 Dec. 31, 2022 84627.61 48737.24 35890.37 451482.02 Dec. 31, 2023 84627.61 45148.20 39479.41 412002.61 The total…
On January 1, 2018, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $425660 and has an expected economic life of six years. Aqua expects the residual value at December 31, 2021, to be $62,000. Negotiations led to Maywood guaranteeing a $88,000 residual value. Equal payments under the lease are $124,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Maywood is aware that Aqua used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. & 2. Prepare the appropriate entries for Maywood on January 1, 2018 and December 31, 2018, related to the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first…