Homespun Resources Ltd was incorporated in 20X2 and is a mining operation in northern Alberta. The company is required by the terms of provincial legislation to remediate mine sites when mining is completed. The following events and decisions with respect to operations relate to Homespun’s decommissioning obligations:

Required:
1. Prepare journal entries for the events listed above.
2. Calculate the balance of the decommissioning obligation at each 31 December, from 20X2 to 20X4.

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January 20X2 30 September 20X2 31 December 20X2 30 September 20X3 31 December 20X3 30 September 20X4 31 December 20X4 Commenced mining on Site 1; expected duration of operations is three years, and site remediation is expected to be $500,000 at that time. Decommissioning obligation is recorded. A reasonable interest rate is 7%. Commenced mining on Site 2; expected duration of operations is five years, and site remediation is expected to be $1,200,000 at that time. Decommissioning obligation is recorded. A reasonable interest rate is 7%. Interest on decommissioning obligation for Site 1 and Site 2 is recorded. Interest on decommissioning obligation for Site 2 is recorded, on the anniversary date of the mine opening. Interest on decommissioning obligation for Site 1 and Site 2 is recorded. Site 1 is now estimated to close in two years' time (rather than the one remaining year expected) and remediation costs are anticipated to increase by 30%. Interest on decommissioning obligation for Site 2 is recorded, on the anniversary date of the mine opening. Site 2 is now estimated to close in two years (rather than the three remaining years expected) and remediation is now estimated at $900,000. Interest on decommissioning obligation for Site 1 and Site 2 is recorded.