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During the year ending 31 December 2020 Oremine Co acquired an iron ore mine at a cost of 6 million. In addition, when all the
During the year ending 31 December 2020 Oremine Co acquired an iron ore mine at a cost of 6 million. In addition, when all the ore has been extracted (estimated ten year's time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of 2 million. These costs would still have to be incurred even if no further ore was extracted. How should this 2 million future cost be recognised in the financial statements for the year ended and as at 31 December 2020? Should not be recognised at all as no cost has arisen yet An accrued liability of 200,000 per year for next ten years Provision of 2 million and 2 million expensed to operating costs in 2018 Provision of 2 million and 2 million capitalised as part of the cost of the mine, which will be depreciated over 10 years
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