Asset Retirement Obligation

On January 1, 2013, Major Company purchased a uranium mine for $800,000. On that date, Major estimated that the mine contained 1,000 tons of ore. At the end of the productive years of the mine, Major Company will be required to spend $4,200,000 to clean up the mine site. The appropriate discount rate is 8%, and it is estimated that it will take approximately 14 years to mine all of the ore. Major uses the productive-output method of depreciation. During 2013, Major extracted 100 tons of ore from the mine.

Click here to access the FV table to use with this problem. Round the cost of the uranium mine to the nearest dollar. In your calculations, round the depletion per ton to the nearest dollar.

Compute the amount of depreciation (or depletion) expense for 2013. $

Compute the amount of accretion expense for 2013. $