Stellar Mining Corporation [SMC] prospects for new minerals on nearby planets. It sets up operations on a neighboring planet Keplar after discovering vast deposits of a very rare mineral which is used in producing solid state fuel for space transportation. The Inter Planetary Board has been very strict on ecological preservation on planets under its governance and has been most careful not to follow ithe path of Planet Earth. SMC is required by the existing planetary laws to reclaim and restore the site once the mining operations are completed. The company expects to close the mine after 25 years of operation, at the end of 2040. These reclamation and restoration measures are expected to then cost $15,000,000. SMC uses an 8% annual discount rate and accrues interest semi-annually.

The cost of setting up the mine, classified as Plant and Equipment - Mining, amounted to $24,000,000. SMC attributes these costs to be the result of acquiring the mine and expects that no additional reclamation and restoration costs will be incurred in the future. It uses a fiscal year ending December 31.

Question 1:

Determine the date on which the mine began operations.

a.

January 1, 2026

b.

December 31, 2025

c.

January 1, 2015

d.

January 1, 2016

e.

None of the above but some other date.

Question two:

The amount and account required to record the interest that would accrue on the asset retirement obligation for the full year ended December 31, 2017, would be: [$ Amount; Debit/Credit Account]

a.

$351,212; Debit - Manufacturing Overhead [OR Cost Of Goods Manufactured] .

b.

$351,212; Debit - Interest Expense.

c.

$186,283; Debit - Interest Expense.

d.

$186,283; Debit - Accretion Expense.

e.

$1,200,000; Debit - Manufacturing Overhead [OR Cost Of Goods Manufactured].

Question three:

Determine the amount of the annual depreciation expense which the company would record for the full year 2027 using the straight line method.

a.

$960,000.

b.

$522,213.

c.

$1,044,426.

d.

$84,426.

e.

None of the above.

Question Four:

Early in 2041, following the closure of the mine, SMC invites tenders from reputed environmental companies for the restoration and reclamation work which SMC was responsible. The company following a careful review of the final final cost estimates,accepted a bid from Jupiter Environmental Remediation Company [JERC] which appeared compatible with the objectives of SMC. The bid would lead to a 16% loss in 2041 for the ARO work done.

Determine the amount of the bid.

a.

$1,772,946.

b.

$2,448,354.

c.

$25,772,946.

d.

$26,448,354.

e.

None of the above.