Kent Mining Company CMC prospects for new minerals on Krypton and other nearby planets It sets up operations on a neighboring planet Zippon after discovering vast deposits of a very rare mineral which is used in producing solid state fuel for space transportation The Zippon government has been very strict on ecological preservation on its planet and has been most careful not to follow in the path of Planet Earth CMC is required by the planetary existing laws to reclaim the site once the mining operations are completed The company expects to close the mine after a 20 year operation, at the end of 2035 and estimates that such reclamation and restoration measures will cost $5,000,000 CMC uses a 6 annual discount rate and accrues interest semi annually The cost of setting up the mine, classified as Plant and Equipment Mining, amounted to $16,000,000 CMC attributes these costs to be the result of acquiring the mineand expects that no additional reclamation and restoration costs will be incurred in the future It uses a fiscal year ending December 31 Determine the date on which the mine began operations a January 1, 2035 b January 1, 2015 c December 31, 2016 d January 1, 2016 e None of the above but some other date 17 The journal entry required to record the future reclamation andrestoration costs when the mine began its operations would include ( $ Amount Debit Credit Account ) a $1,532,800 Credit ARO Liability b $16,000,000 Credit ARO Liability c $5,000,000 Credit ARO Liability d $ 17,532,800 Debit Loss on Land Restoration e $1,559,000 Credit ARO Liability The amount and account required to record the interest that would accrue on the asset retirement obligation for the y ear endedDecember 31, 2017, would be $ Amount Debit Credit Account a $97,486 Debit Manufacturing Overhead OR Cost Of Goods Manufactured b $150,000 Debit Interest Expense c $99,032 Debit Interest Expense d $97,486 Debit Accretion Expense e $300,000 Debit Manufacturing Overhead OR Cost Of Goods Manufactured Determine the amount of the annual depreciation expense which the company would record for the year 2017 using the straight line method a $876,640 b $1,600,000 c $153,280 d $1,753,280 e None of the above Sometime early in 2036, following the closure of the mine at the end of 2035, CMC puts out a call seeking reputed environmental companies to bid for the restoration and reclamation work which CMC was required to carry out The final cost estimates had to be reviewd and CMC accepted a bid from Jupiter Environmental Remedation Company JERC which appeared compatible with the objectives of CMC The bid would require CMC to record an 18 50 loss on the balance of the ARO on December 31, 2035 Determine the amount of the bid a $925,000 b $1,816,368 c $3,885,000 d $5,925,000 e None of the above

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Kent Mining Company [CMC] prospects for new minerals on Krypton and other nearby planets.It sets up operations on a neighboring planet Zippon after discovering vast

Kent Mining Company [CMC]prospects for new minerals onKryptonand other nearby planets.It sets up operations on a neighboring planetZipponafter discovering vast deposits of a very rare mineral which is used in producing solid state fuel for space transportation.TheZippongovernment has been very strict on ecological preservation on its planet and has been most careful not to follow in the path ofPlanet Earth.CMCis required by the planetary existing laws to reclaim the site once the mining operations are completed. The company expects toclosethe mine after a 20-year operation, at theend of 2035and estimates that such reclamation and restoration measures will cost $5,000,000.CMCuses a6% annual discount rate andaccrues interest semi-annually.

The cost of setting up the mine, classified asPlant and Equipment - Mining,amounted to $16,000,000.CMCattributes these costs to be the result of acquiring the mineand expects that no additional reclamation and restoration costs will be incurred in the future.It uses afiscal year ending December 31.

Determine the date on which the mine began operations.

January 1, 2035

January 1, 2015

December 31, 2016

January 1, 2016

None of the above but some other date.

[17]The journal entry required to record the future reclamation andrestoration costs when the mine began its operations would include($ Amount;Debit/Credit - Account):

$1,532,800;Credit - ARO Liability

$16,000,000;Credit - ARO Liability

$5,000,000;Credit - ARO Liability

$17,532,800;Debit - Loss on Land Restoration

$1,559,000;Credit - ARO Liability

Theamountandaccountrequired to record the interest that would accrue on the asset retirement obligation forthe yearendedDecember 31, 2017,would be:[$ Amount;Debit/Credit Account]

$97,486;Debit -Manufacturing Overhead [OR Cost Of Goods Manufactured] .

$150,000;Debit - Interest Expense.

$99,032;Debit -Interest Expense.

$97,486;Debit - Accretion Expense.

$300,000;Debit - Manufacturing Overhead[OR Cost Of Goods Manufactured].

Determine the amount of the annual depreciation expense which the company would record for the year2017using thestraight line method.

$876,640.

$1,600,000.

$153,280.

$1,753,280.

None of the above.

Sometime early in 2036, following the closure of the mine at the end of 2035,CMCputs out a call seeking reputed environmental companies to bid for the restoration and reclamation work whichCMCwas required to carry out.The final cost estimates had to be reviewd andCMCaccepted a bid fromJupiter Environmental Remedation Company [JERC]which appeared compatible with the objectives ofCMC.The bid would requireCMCto record an18.50% losson the balance of theARO on December 31, 2035.Determine the amount of the bid.

$925,000.

$1,816,368.

$3,885,000.

$5,925,000.

None of the above.