Case 2: Magnet Mining Company has just completed the first year of operations at its new strip mine, the Wicked Chicken. Magnet spent $10 million for the land and $20 million in preparing the site for mining operations. The mine is expected to operate for 20 years. Magnet is subject to environmental statutes requiring it to restore the The Wicked Chicken site upon completion of mining operations.Based on its experience and industry data, as well as current technology, Magnet forecasts that restoration will cost about $10 million when it is undertaken. Of those costs, about $4 million is for restoring the "overburden" that was removed in preparing the site for mining operations (prior to opening the mine); the rest is directly proportional to the depth of the mine, which in turn is directly proportional to the amount of ore extracted.

Required: List the specific standards according to the FASB Codification and detail the transaction recording for each of the following questions.

1. Should Magnet Mining Company recognize a liability for site restoration in conjunction with the opening of the Wicked Chicken Mine? If so, what is the amount of that liability?

2. After Magnet has operated the Wicked Chicken Mine for 5 years, new technology is introduced that reduces Magnet's estimated future restoration costs to $7 million, $3 million of which relates to restoring the overburden. How should Magnet account for this change in its estimated future liability?