1.During the year ended 30 June 2020 the Badani Mining Company acquired two areas – Wyong and Mulgrave and has spent the past year undertaking exploration and evaluation activities in these three areas of interest. Details of the costs incurred are as follows. Site Acquisition costs $m Exploration costs $m Evaluation costs $m Wyong 9.7 12.8 0 Mulgrave 15.1 9.9 9.6 Preliminary drilling has shown promising results for the Wyong site. However, due to the recent discovery of Denisovan skull fragments in the Wyong area, Commonwealth legislation has been enacted regarding archaeological sites, which imposes an unconditional ban on any development in areas declared to be of archaeological significance. On 18 March 2020, Lithium is discovered at the Mulgrave site. Company geologists estimate that 200,000 tonnes of Lithium are located at the site, which exceeds the company’s minimum benchmark of 120,000 tonnes of Lithium to proceed with the development of an area of interest. Required Determine the amount of exploration and evaluation assets recognised by Badani Mining Company for the year ended 30 June 2020 in accordance with the requirements of AASB 6. (6 marks)

2. On 1 July 2020, Drake Ltd issues 4,000 convertible notes. The notes have a three-year term and are issued at par with a face value of $1,000 per note, giving total proceeds at the date of issue of $4 million. The notes pay interest at 5% p.a. annually in arrears. The holder of each note is entitled to convert the note into 300 ordinary shares of Drake Ltd at contract maturity. When the notes are issued, the prevailing market interest rate for similar debt (similar term, similar credit status of issuer and similar cash flows) without conversion options is 7% per annum.

Required

a) Prepare an effective interest schedule and distinguish between the allocation of interest payments and interest expense for each reporting period during the term of the note issue. (2 marks)
b) Prepare the journal entries of Drake Ltd to account for the convertible notes for each year ending 30 June under the following circumstances. (7 marks)

The holders do not exercise their option and the note is repaid at the end of its term.

Present value of $1 annuity over 3 years at 7% per annum	2.6243160
Present value of $1 lump sum in 3 years at 7% per annum	0.81629788