Problem 2: Natural Resources

Misery Mines purchased a lithium mine on January 1, 2019 for $97 million. They spent $6 million on land improvements (roads, bridges, tunnels, etc) on the land to allow for the excavation of the gemstones. The mine is expected to be operational for 11 years and 7,200 tons of lithium. At the end of the useful life of the mine, Misery Mines is expecting to pay $19 million to fix the environmental damage they caused. The related interest rate risk of the mine is 15%. Finally, after fixing environmental damage, Misery Mines expects to sell the land for $5 million.

2.1: Record the January 1, 2019 journal entry for the acquisition of the mine, including the land improvements and asset retirement obligation.

2.2: During 2019, Misery Mines excavated 620 tons of lithium from the mine. Record the necessary journal entry.

2.3: During 2019, Misery Mines sold 550 tons of lithium at a price of $16,500 per ton. Record the journal entry for this transaction.

2.4: Record any necessary adjusting entry related to the asset retirement obligation on December 31, 2019.

2.5: On January 1, 2022 (after 3 years and all of the gems being mined), Misery Mines paid $18 million dollars in environmental repair costs (remediation) to close the mine. Record the journal entry for this transaction.