A company paid $2,000,000 in year 1 for the mining site and spent an additional $500,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately. four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: Cost Probability 1 $200,000 20% 2 500,000 45% 3 800,000 35% To aid extraction, Falcon purchased some new equipment on July 1, year 1, for $150,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 10%. PV factor (n=4, 1-10%) is .68301. Required: What is the Accretion Expense in year 1? (Round to nearest dollar)

A company paid $2,000,000 in year 1 for the mining site and spent an additional $500,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately. four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: Cost Probability 1 $200,000 20% 2 500,000 45% 3 800,000 35% To aid extraction, Falcon purchased some new equipment on July 1, year 1, for $150,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 10%. PV factor (n=4, 1-10%) is .68301. Required: What is the Accretion Expense in year 1? (Round to nearest dollar)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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