Natural resource A

Depletion of Natural Resource Version A: Himalaya Inc purchased the rights to a salt mine on Oct 1^st 2021. The rights to the salt mine cost $25 million and was paid for using cash. The salt mine is expected to yield 5,000 million tons of salt over a period of 20 years. The asset retirement obligation associated with this salt mine is as follows:

Outcome	Probability	ARO cash outflow
A	0.5	10,000,000
B	0.3	5,000,000
C	0.2	2,000,000
D	0.05	1,000,000
E	0.05	20,000,000

The asset retirement obligation outflow is expected to occur 20 years in the future. The market rate for Himalaya Inc. is 5%. The mine produces 15 million tons of salt in 2021.

Provide the transactional journal entries for the purchase on Oct 1^st 2021. (6 points)

Provide the adjusting entries associated with depletion for the mine on Dec 31^st 2021. (4 points)