2. Muscat Enterprises purchased new equipment for $365,000, terms f.o.b. shipping point. Other costs connected with the purchase were as follows: State sales tax 29.200 Freight costs 5.600 Insurance while in transit 800 Insurance after equipment placed in service 1.200 Installation costs 2.000 Insurance for the first year of operations Testing 700 Required: Determine the capitalized cost of the equipment. 2,400 Exercises 1. Oman Mining operates a copper mine in Muscat. Acquisition, exploration, and development costs totaled $8.2 million. Extraction activities began on July 1, 2011. After the copper is extracted in approximately six years, Oman Mining is obligated to restore the land to its original condition, including constructing a park. The company's controller has provided the following three cash flow possibilities for the restoration costs: Cash Flow Probability 1 $700.000 30% 2 800.000 25% 3 900.000 45% The company's credit-adjusted, risk-free rate of interest is 5%, and its fiscal year ends on December 31. Required: 1. What is the initial cost of the copper mine? (Round computations to nearest whole dollar.) 2. How much accretion expense will Oman Mining report in its 2011 income statement? 3. What is the carrying value (book value) of the asset retirement obligation that Oman Mining will report in its 2011 balance sheet? 4. Assume that actual restoration costs incurred in 2017 totaled $860,000. What amount of gain 3. On July 1, 2011, Muscat Company purchased land and incurred other costs relative to the Ostruction of a Ow warehouse. A summary of economic activities is listed below: Purchase price $185,000 Title insurance $1.500 Legal fees to purchase land $1.000 Cost of razing old building on lot 8.500 Proceeds from sale of salvageable materials (1.200) Property taxes, January 1, 2011 - June 30, 2011 3.000 Cost of grading and filling building site 9,000 Cost of building construction 620,000 Interest on construction loan 12.000 Cost of constructing driveway 8,000 Cost of parking lot and fencing 12.000 Required: Indicate the accounts that would be affected by the above transactions and the resulting balance in each account. Apply the interest on the construction loan to the cost of the building only