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On January 1, Year 1, Blaze Mining Enterprises purchases an existing coal mine. Blaze expects to operate the min for four years, after which it

On January 1, Year 1, Blaze Mining Enterprises purchases an existing coal mine. Blaze expects to operate the min for four years, after which it is legally required to dismantle the mine. Blaze estimates that it will pay $500,000 at the beginning of Year 5 to dismantle the mine. What would be the balance of the Asset Retirement Obligation (ARO) at the end of Year 2? Blaze Mining has an incremental borrowing rate of 7%.

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