1.

a. A catastrophic fire destroyed Lumber Pacific Entitys (LPE) warehouse. LPE issued an insurance claim with its insurance company to receive the replacement cost of the warehouse and its contents that were destroyed. An investigation has to be performed before the insurance company will agree to reimburse LPE for its loss. It is more likely than not that the investigation will result in LPE receiving full reimbursement. The investigation is scheduled to take place January 2014. LPE is preparing its 2013 financial statements. How would LPE account for the potential insurance reimbursement that is probable to be received next year?

b. Gold Miner Extractors (GME) purchased a complex piece of mining equipment at a cost of $500,000. The equipment is located in a mine already and is unable to be moved to other locations. As part of the purchase, GME accepted the responsibility to restore the mine to its original condition after the machines useful life expires in 5 years. GME has agreed to pay $300,000 at the end of 5 years in order to restore the mine. The appropriate interest rate to use in computing the present value of mine restoration obligation is 5%. What is the journal entry GME should make to record recognize the provision relating to the future restoration obligation?

c. The CFO of Diamonds for You Corp. decides that the entity needs to recognize a provision of $500,000. The CFO anticipates this payment having to be made a year and a half from now. The current discount rate is 7%.

a. What is the entry to record the provision under IFRS?

b. What is the entry to record the provision under U.S. GAAP?