During the year LM ltd acquired an iron ore mine at a cost of GHS6m. In addition, when all the ore has been extracted (estimated ten years' time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of GHS2m. These costs will still be incurred even if no further ore is extracted. How should this GHS2m future cost be recognised in the financial statements? A. Provision GHS2m and GHS2m capitalised as part of cost of mine B. Provision GHS2m and GHS2m charged to operating costs C. Accrual GHS200,000 per annum for next ten years D. Should not be recognised as no cost has yet arisen

During the year LM ltd acquired an iron ore mine at a cost of GHS6m. In addition, when all the ore has been extracted (estimated ten years' time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of GHS2m. These costs will still be incurred even if no further ore is extracted. How should this GHS2m future cost be recognised in the financial statements? A. Provision GHS2m and GHS2m capitalised as part of cost of mine B. Provision GHS2m and GHS2m charged to operating costs C. Accrual GHS200,000 per annum for next ten years D. Should not be recognised as no cost has yet arisen

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 29CE

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