Quarry Ltd

$.$

$$is a mining company with several locations throughout Europe. Since its inception, they have always abided by the regulations of the various countries. With the introduction of Sustainability reporting, the board is currently discussing what should be included in their financial statements. They firmly believe that if they were to include details on preservation policies such as zero tolerance for pollution, conservation of wildlife, reforestation and recycling, their reputation would be enhanced. This is very important to them since their activities cause significant damage to the environment, including deforestation. They are eager to come to a consensus especially since they have never embarked on such activities. On January

$12015$ Quarry Ltd

acquired the rights to mine a site at a cost of $$200$

$$million$.$ The site is expected to be decommissioned in

$30$ years from the date of acquisition. At the end of the

$30$ years, there is no residual value and legislation requires Quarry Ltd to decommission the site once mining operations are completed. After

$1$year of site preparation, the mine became operational as of January $1$

$2016.$ The mine is situated in a country where there is no environmental legislation obliging companies to rectify environmental damage and it is very unlikely that any such legislation will be enacted within $30$ years. It has been estimated that the cost to decommission the mine is $

$50$ million. The cost of restoring the site will be $

$30$ million. The company cost of capital is

$7\%$ and its year end is December $31$ Quarry Ltd uses straight line depreciation for its non

$-$

current assets. Mining operations ended as scheduled and the costs to decommission and restore the site in $2045$ were $$55$ million and $$20$ million respectively.

Quarry Ltd

$.$

$$is a mining company with several locations throughout Europe. Since its inception, they have always abided by the regulations of the various countries. With the introduction of Sustainability reporting, the board is currently discussing what should be included in their financial statements. They firmly believe that if they were to include details on preservation policies such as zero tolerance for pollution, conservation of wildlife, reforestation and recycling, their reputation would be enhanced. This is very important to them since their activities cause significant damage to the environment, including deforestation. They are eager to come to a consensus especially since they have never embarked on such activities. On January

$12015$ Quarry Ltd

acquired the rights to mine a site at a cost of $$200$

$$million$.$ The site is expected to be decommissioned in

$30$ years from the date of acquisition. At the end of the

$30$ years, there is no residual value and legislation requires Quarry Ltd to decommission the site once mining operations are completed. After

$1$year of site preparation, the mine became operational as of January $1$

$2016.$ The mine is situated in a country where there is no environmental legislation obliging companies to rectify environmental damage and it is very unlikely that any such legislation will be enacted within $30$ years. It has been estimated that the cost to decommission the mine is $

$50$ million. The cost of restoring the site will be $

$30$ million. The company cost of capital is

$7\%$ and its year end is December $31$ Quarry Ltd uses straight line depreciation for its non

$-$

current assets. Mining operations ended as scheduled and the costs to decommission and restore the site in $2045$ were $$55$ million and $$20$ million respectively.

b$)$ Prepare the necessary journal entries for the years ended December $2015$ & $2016$ Show all workings.

c$)$ Prepare the journal entries for year ended December $31,2045$ Show all workings