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Prepare the journal entries to recognize site restoration

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Reference no: EM132774669

Bailey's Gold Mines Inc. (BGMI) purchases a piece of land for the purpose of developing a gold mine. BGMI is legally required to remove all structures and convert the mine site to a wildlife sanctuary at the end of its estimated 10-year useful life. BGMI estimates that it will have to spend $11,000,000 to decommission the site and reclaim the land when operations cease. The present value of this $11,000,000 site restoration cost, assuming a discount rate of 5%, is $6,753,046. BGMI uses straight-line depreciation.

Problem 1: Prepare the journal entries to recognize this site restoration cost the company would record upon initial acquisition and subsequently.

Reference no: EM132774669

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