Prepare the journal entry to record the purchase of the mine

Reference no: EM132749457

Question: Buffalo Industries Limited purchased a strip mine for cash on April 1, 2020 at a cost of $5,811,000. Buffalo expects to operate the mine for 10 years, at which it is legally required to restore the surrounding area to its original state. It is estimated that it will cost $492,000 at the end of the mine's useful life. The company's year-end is December 31, and Buffalo follows ASPE.

A. Prepare the journal entry to record the purchase of the mine and to record the asset retirement obligation for the mine on April 1, 2020. Based on the effective interest rate of 5%, the present value of the asset retirement obligation (i.e., its fair value) on the date of acquisition is $302,045. (Round answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

B. Prepare any journal entries required for the mine (straight-line depreciation) and the asset retirement obligation at December 31, 2020. The estimated residual value of the mine is zero. (Round answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

C. On April 1, 2030, Buffalo paid cash to an environmental firm to restore the mine's surrounding area to its original state at a cost of $506,500. Prepare the journal entry for the settlement of the asset retirement. (Round answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Reference no: EM132749457

Questions Cloud

Calculate the assets-to-equity ratio for each alternative : Analyzing Financial Leverage for Alternative Financing Strategies FIT Corporation's return on net operating assets (RNOA) is 10% and its tax rate is 40%.

Would look for a new place of employment in the situation : If your current employer took back benefits previously provided to you, how would you feel? What particular benefits would be a deal breaker for you?

Do think is meaningful to classify people into types : Do you think it is meaningful to classify people into types? Why do you think the United States, contrary to the French, insists on classifying people?

What type of cost-benefit analysis method should use : What type of cost-benefit analysis method should you use when creating a business project for a health club membership system and why?

Prepare the journal entry to record the purchase of the mine : Prepare the journal entry to record the purchase of the mine and to record the asset retirement obligation for the mine on April 1, 2020. Based on the effective

What would a high-performance multicultural team look like : What would a high-performance multicultural team look like? - Identify and review challenges and opportunities of multicultural teams.

What is the volume of the balloon : What is the volume of the balloon if atmospheric pressure remains constant?

What is the molar mass in of the compound : If the resulting solution freezes at -0.186ºC, what is the molar mass in of the compound? (Kf for water = 1.86ºC·c/m)

Prepare journal entries on teal books to record the wages : Prepare the journal entries on Teal's books to record the wages and salaries paid and the employee payroll deductions. (Round answer to 0 decimal places.

User Account

All Pages