1. Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $8.9 million. Extraction activities began on July 1, 2018. After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The companys controller has provided the following three cash flow possibilities for the restoration costs:

	Cash Flow				Probability
1.	$	770,000				25	%
2.		870,000				25	%
3.		970,000				50	%

The companys credit-adjusted, risk-free rate of interest is 6%, and its fiscal year ends on December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round other intermediate calculations to the nearest whole dollar. Enter your answer in whole dollars.) Required: 1. What is the initial cost of the copper mine? 2. How much accretion expense will Schefter report in its 2018 income statement? 3. What is the book value of the asset retirement obligation that Schefter will report in its 2018 balance sheet? 4. Assume that actual restoration costs incurred in 2024 totaled $947,000. What amount of gain or loss will Schefter recognize on retirement of the liability? (Loss amount should be indicated by a minus sign.)

2.

On July 1, 2018, Clearwater Inc. purchased 6,300 shares of the outstanding common stock of Mountain Corporation at a cost of $183,000. Mountain had 21,000 shares of outstanding common stock. The total book value and total fair value of Mountains individual net assets on July 1, 2018, are both $610,000. The total fair value of the 21,000 shares of Mountains common stock on December 31, 2018, is $715,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2018:

Dividends declared and paid, Jan. 1Jun. 30	$	11,100
Dividends declared and paid, Jul. 1Dec. 31	$	11,100
Net income, January 1June 30	$	13,100
Net income, July 1December 31	$	17,100

Required: 1. Prepare the necessary entries for 2018 under the equity method. 2. Prepare any necessary entries for 2018 (other than for the purchase) that would be required if the securities were accounted for under the fair value through net income method.

3.

Jackson Company engaged in the following investment transactions during the current year.

Feb.		17		Purchased 400 shares of Medical Company common stock for $15 per share plus a brokerage commission of $150. Jackson does not have significant influence over Medical.
April		1		Bought 20,000 of the 100,000 outstanding shares of Olde Company for $200,000. Goodwill of $70,000 was included in the price.
June		25		Received a $1.30 per share dividend on Medical Company stock.
June		30		Olde Company reported second-quarter profits of $10,000.
Oct.		1		Purchased 1,000 bonds of Alpha Company for $14 per bond plus a brokerage fee of $300. These bonds are classified as securities available for sale.
Dec.		31		Medical Co. shares are selling for $20 and Alpha stock is selling for $11.

Required: Prepare the appropriate journal entries to record the transactions for the year including year-end adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 4.

Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $8.9 million. Extraction activities began on July 1, 2018. After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The companys controller has provided the following three cash flow possibilities for the restoration costs:

	Cash Flow				Probability
1.	$	770,000				25	%
2.		870,000				25	%
3.		970,000				50	%

The companys credit-adjusted, risk-free rate of interest is 6%, and its fiscal year ends on December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round other intermediate calculations to the nearest whole dollar. Enter your answer in whole dollars.) Required: 1. What is the initial cost of the copper mine? 2. How much accretion expense will Schefter report in its 2018 income statement? 3. What is the book value of the asset retirement obligation that Schefter will report in its 2018 balance sheet? 4. Assume that actual restoration costs incurred in 2024 totaled $947,000. What amount of gain or loss will Schefter recognize on retirement of the liability? (Loss amount should be indicated by a minus sign.) 5. Zvinakis Mining Company paid $300,000 for the rights to mine lead in southeast Missouri. The cost to drill and erect a mine shaft was $2,500,000, and equipment to process the lead ore before shipment to the smelter was $2,010,000. The mine is expected to yield 2,000,000 tons of ore during the five years it is expected to be operating. The equipment has an estimated residual value of $160,000 when mining is concluded. The mine started operations on April 30, 2018. In 2018, 400,000 tons of ore were extracted, and in 2019, 800,000 tons were mined. Required: 1. Compute the depletion rate and the units-of-production depreciation rate. 2. Compute depletion and depreciation for 2018 and 2019.

6.

Hawkins Corporation began construction of a motel on March 31, 2018. The project was completed on April 30, 2019. No new loans were required to fund construction. Hawkins does have the following two interest-bearing liabilities that were outstanding throughout the construction period: $5,400,000, 6% note $11,960,000, 10% bonds Construction expenditures incurred were as follows:

March 31, 2018	$	3,640,000
June 30, 2018		5,640,000
November 30, 2018		1,728,000
February 28, 2019		2,640,000

The companys fiscal year-end is December 31. Required: Calculate the amount of interest capitalized for 2018 and 2019.