Prepare the journal entries to be recorded on december

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Question - Ardoise Ltd. specializes in extracting ore. It prides itself for following high environmental standards in the extraction process. On January 1, 2021, Ardoise purchased the rights to use a parcel of land from the province of Nova Scotia. The rights cost $20,000,000 and allowed the company to extract ore for five years, i.e., until Dec 31, 2025. Ardoise expects to extract the ore evenly over the contract period. At the end of the contract, Ardoise must clean up and restore the land. Ardoise estimates this will cost $2,600,000.

Ardoise uses a discounted cash flow method to calculate the fair value of this obligation and believes that 6% is the appropriate discount rate. Ardoise uses straight-line depreciation method. Ardoise uses the calendar year as its fiscal year and follows IFRS.

Required -

a) Prepare the journal entries to be recorded on January 1, 2021.

b) Prepare the journal entries to be recorded on December 31, 2021.

Reference no: EM133119242

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