Eagle Resources, an ASPE company, purchased an abandoned mine in Northern Ontario and estimated the asset retirement costs would be $3 million. Several years later they determined the asset retirement costs would increase by $1 million due to the government applying stricter regulations concerning climate change. How should Eagle Resources acccount for this increase? Changes in the estimate after acquisition should be capitalized in the asset. Any changes in the estimate after acquisition should be offset against accumulated depreciation. Any changes in the estimate after acquisition should be expensed in the period in which they are incurred. Because it is after acquisition, there is no accounting required until the actual expenses are incurred, at which time they will be capitalized.

Eagle Resources, an ASPE company, purchased an abandoned mine in Northern Ontario and estimated the asset retirement costs would be $3 million. Several years later they determined the asset retirement costs would increase by $1 million due to the government applying stricter regulations concerning climate change. How should Eagle Resources acccount for this increase? Changes in the estimate after acquisition should be capitalized in the asset. Any changes in the estimate after acquisition should be offset against accumulated depreciation. Any changes in the estimate after acquisition should be expensed in the period in which they are incurred. Because it is after acquisition, there is no accounting required until the actual expenses are incurred, at which time they will be capitalized.

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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