Problem 2 (20 marks) ABC Mining Ltd. is a mining company in Northern Ontario. After purchasing a tract of land for $500,000 and incurring exploration costs of $80,000, the company found mineral deposits (ore) estimated at 100,000 tonnes. It was further estimated that 5,000 tonnes of ore would be mined in the first and last (11th) years and 10,000 tonnes every year in between. The land was expected to have a residual value of $25,000. ABC follows the policy of expensing exploration costs and capitalizing development costs. Structures and storing facilities were built on site at a cost of $40,000, which were expected to have a useful life of 18 years with no residual value. These building would be useless when the mine is depleted. Mining machinery was acquired and installed at the mine at a cost of $80,000. The machinery had a use life of 20 years with no residual value, but can be used at ABC's operations elsewhere. ABC also spent $150,000 to excavate a shaft (vertical tunnel) into the mine through which ore would be extracted and removed. The environmental cleanup which was required under the provincial law would cost $80,000 when the mine was closed 11 years later. The present value of the cleanup cost should be included in the cost of the mine. The prevailing interest rate is 6%. Use the attached table for present value calculations. (1) Calculate the cost of the mining property, excluding the structures and machinery, when the mining operation started. (2) Prepare the journal entry or entries to record the mining property, and the related expenses and assets when the mine was ready for operations. (3) ABC extracts and removes 6,000 tonnes of ore in the first year of operations. Prepare journal entries for depreciation and depletion for that year.