Reference no: EM132869567

Question - A Company acquired a tract of land containing an extractable natural resource. The entity is required by the contract to restore the land to a condition suitable for recreational use after it had extracted the natural resource.

Geological survey indicated that the recoverable reserves will be 1,000,000 tons and that the extraction will be completed in 10 years.

Acquisition Cost 9,000,000

Exploration and development cost 1,000,000

Expected cash flow for restoration cost 1,500,000

Credit-adjusted risk free interest rate 12%

Using a PV of decimal points, determine:

1. Determine total depletable cost, beginning of year.

2. Determine depletion expense for the current year.

3. Determine carrying amount of wasting asset, end of the year.