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Item 4

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Homespun Resources Ltd was incorporated in 20X2 and is a mining operation in northern Alberta. The company is required by the terms of provincial legislation to remediate mine sites when mining is completed. The following events and decisions with respect to operations relate to Homespuns decommissioning obligations: (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)

January 20X2Commenced mining on Site 1; expected duration of operations is three years, and site remediation is expected to be $502,000 at that time. Decommissioning obligation is recorded. A reasonable interest rate is 7%.30 September 20X2Commenced mining on Site 2; expected duration of operations is five years, and site remediation is expected to be $1,220,000 at that time. Decommissioning obligation is recorded. A reasonable interest rate is 7%.31 December 20X2Interest on decommissioning obligation for Site 1 and Site 2 is recorded.30 September 20X3Interest on decommissioning obligation for Site 2 is recorded, on the anniversary date of the mine opening.31 December 20X3Interest on decommissioning obligation for Site 1 and Site 2 is recorded. Site 1 is now estimated to close in two years time (rather than the one remaining year expected) and remediation costs are anticipated to increase by 30%.30 September 20X4Interest on decommissioning obligation for Site 2 is recorded, on the anniversary date of the mine opening. Site 2 is now estimated to close in two years (rather than the three remaining years expected) and remediation is now estimated at $910,000.31 December 20X4Interest on decommissioning obligation for Site 1 and Site 2 is recorded.

Required: 1. Prepare journal entries for the events listed above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the decommissioning obligation on commencement of mining on Site 1 expected to continue for three years, and site remediation is expected to be $502,000. A reasonable interest rate is 7%. Record the decommissioning obligation on commencement of mining on Site 2 expected to continue for five years, and site remediation is expected to be $1,220,000. A reasonable interest rate is 7%. Record he interest on decommissioning obligation for Site 1.

Record the interest on decommissioning obligation for Site 2.

Record the interest on decommissioning obligation for Site 2.

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• Record the interest on decommissioning obligation for Site 1.
• Record the decommissioning obligation if mining on Site 1 expected to continue for two years, and site remediation is expected to increase by 30%.
• Record the interest expense if mining on Site 1 expected to continue for two years, and site remediation is expected to increase by 30%.
• Record the interest on decommissioning obligation for Site 2.
• Record the decommissioning obligation if mining on Site 2 expected to continue for two years (rather than the three remaining years expected), and site remediation is now estimated at $910,000.
• Record the interest expense if mining on Site 2 expected to continue for two years (rather than the three remaining years expected), and site remediation is now estimated at $910,000.
• Record the interest on decommissioning obligation for Site 2.