Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $5.9 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The companys controller has provided the following three cash flow possibilities for the restoration costs: (1) $530,000, 25% probability; (2) $580,000, 40% probability; and (3) $680,000, 35% probability. The companys credit-adjusted, risk-free rate of interest is 7%.

What is the book value of the asset retirement liability at the end of one year?

Assuming that the actual restoration costs incurred after five years are $626,000, what amount of gain or loss will Smithson recognize on retirement of the liability?