Refer to problem P12-45. Assume that SCMI elects to report its financial results in accordance with Accounting Standards for Private Enterprises (ASPE).

Problem P12-45

During 2021, Surinder’s Copper Mine Inc. (SCMI) built the infrastructure for an open pit copper mine in a remote area in Northern British Columbia at a total cost of $20 million, paid in cash. The mine is expected to produce 800,000 tonnes of copper over its estimated useful life of 10 years.

The BC government’s approval granted to SCMI was conditional upon the company remediating the site and establishing a wildlife reserve. The estimated cost of remediation is $5 million. An appropriate interest rate for this obligation is 5%.

Assume that SCMI has grouped the $20 million construction costs and the remediation asset in an account called “Mine assets” and that it uses the units-of-production method to depreciate this asset. SCMI began mining operations in January 2022 and during the year it mined 60,000 tonnes of copper. In 2023, it increased its production to 90,000 tonnes of copper. While SCMI is a private company, it elects to report its financial results in accordance with IFRS. Its year-end is December 31.

Required:
a. Prepare a journal entry to record the asset retirement obligation and a summary journal entry to record the cost of construction. Date both entries December 31, 2021.
b. Prepare the adjusting entries pertaining to the mine asset and asset retirement obligation for the year ended December 31, 2022.
c. Prepare the adjusting entries pertaining to the mine asset and asset retirement obligation for the year ended December 31, 2023