uring the year to 30 September 2003 Hudson build a new mining facility to take advantage of new laws

regarding on-shore gas extraction. The construction of the facility cost $10 million, and to fund this

Hudson took out a $ 10 million

loan

6% loan on 1 October 2002, which will not be repaid until 2006.

The 6% interest was paid on 30 September 2003.

Construction work began on 1 October 2002, and the work was completed on 31 August 2003. As not all

the funds were required immediately, Hudson invested $ 3 million of the loan in 4 % bonds

from 1

October 2002 until 31 January 2003. Mining commenced on 1 September 2003 and is expected to

continue for 10years.

As a condition for being allowed to construct the facility, Hudson is required by law to dismantle it on 1

October 2013. Hudson estimated that this would cost a further $ 3 million.

As the equipment is extremely specialized, Hudson invested significant resources in recruiting and

training employees. Hudson spent $ 600 000 on this process in the year to 30 September 2003, believing

it would be worthwhile as it anticipates that most employees will remain on the project for the entire 10

year duration.

Hudson has a cost of capital of 6%.

Required?

Show, using extracts, the correct financial reporting treatment for the above items in the financial

statements for the year ended 30 September 2003