Problem 1:

Copper Mine Inc. (CMI) is a privately owned mining company operating in a remote

area of Northern British Columbia. CMI has a December 31 year end and has elected to

report its financial results in accordance with IFRS. During 2020, CMI built the

infrastructure for an open pit copper mine at a total cost of $18 million paid in cash. The

mine is expected to produce 800,000 tonnes of copper over its estimated useful life of

10 years. Approval was granted to CMI to build and operate the mine on the condition

that the company remediate the site and establish a wildlife reserve at the end of the

mines useful life. The estimated cost of remediation is $2 million. An appropriate

interest rate for this obligation is 4%.

Assume that CMI has grouped the $18 million construction costs and the remediation

asset in an account called "Mine assets" and that it uses the units-of-production method

to depreciate this asset. CMI began mining operations on January 1, 2021 and during

the year it mined 58,000 tonnes of copper. In 2022, it increased its production to 92,000

tonnes of copper.

Required

a. Prepare a journal entry to record the site restoration obligation and a summary

journal entry to record the cost of construction. Date both entries December 31,

202

0.

b. Prepare the adjusting entries pertaining to the mine asset and site restoration

obligation for the year ended December

31, 2021.

c. Prepare the adjusting entries pertaining to the mine asset and site restoration

obligation for the year

ended December 31, 2022.

d. What will the carrying value of the site restoration obligation be at December 31,

2030?