Question
Aurora Mining Company paid $1,200,000 in 2021 for a copper mine site and spent an additional $500,000 to prepare the mine for extraction of the
Aurora Mining Company paid $1,200,000 in 2021 for a copper mine site and spent an additional $500,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately 4 years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs:
| Cash Outflow | Probability |
1 | $300,000 | 25% |
2 | 400,000 | 45% |
3 | 600,000 | 30% |
Question
The credit-adjusted risk-free rate of interest is 10%.
Question
Journal entries to record the acquisition costs of the mine would include:
a debit to Copper Mine for $1,700,000 | ||
a debit to Copper Mine for $2,135,000 | ||
a debit to Copper Mine for $1,997,109 | ||
a debit to Copper Mine for $3,017,301 |
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