why answer said that On 31 December 2018, mine site restoration costs of $1 200 000 are estimated to have been incurred as

a result of development and construction activities. The present value of these costs is included as part of

pre-production costs capitalised with a corresponding increase recognised in a provision for restoration

costs. The present value is $476 537 or ($1 200 000 x (1.08)-12) ?

why not -11 power?

and why Restoration costs incurred as a result of production:

On 31 December 2019, mine site restoration costs of $493 000 are estimated to have been incurred as a

result of production. The present value of these costs is included as part of production costs. The present

value is $211 439 or ($493 000 x (1.08)-11)

why not -10 power?

2 Oxford Copper Limited (Oxford) acquired the Charity mining property for $13.5 million in 2017 and treated it as an area of interest. The company began exploring for ore and incurred the following costs in 2017: Geological studies $65000 Exploratory drilling 345 000 Sampling 192000 Economically recove rable reserves of 22 million tonnes of ore were confirmed by geologists in late December 2017. Geologists estimate that once ore extraction commences, the Charity area of interest will be operational for approximately 12 years, after which the ore deposit will be exhausted. The land has an estimated residual value of $160000. It is company policy and a community expectation that all mine equipment will be removed when the ore deposit is exhausted and the mine site restored to its original condition. During 2018 the company spent $675000 developing the property and $1746 000 on capital assets, as follows: Costs Estimated life Mine buildings $421000 18 years Railroad and associated equipment Other mine equipment 25 years 905000 10 years 420000 The buildings, railroad and associated equipment cannot be economically removed from the mine location, but the other mine equipment can be removed and has alternative uses. On 31 December 2018 it is estimated that development and construction activities have resulted in $1.2 million of future restoration costs. A discount rate of 8% is identified by the company as best reflecting the risk and commercial conditions associated with the Charity area of interest Production commenced on 1 January 2019. The details of operations during the period 1 January 2019 to 31 December 2019 are summarised below. Tonnes of ore mined 1460000 Tonnes of ore sold (at $10 per tonne) 1320000 Production costs (excluding depreciation and amortisation) $2 120000 $ 215000 Administration expenses Selling expenses $136000 Income tax expense $1 180000 $ 493000 Restoration costs Required Prepare an extract from the statement of comprehensive income showing profit after tax for Oxford Copper Ltd for the year ended 31 December 2019 in accordance with AASB 6 and other relevant Australian accounting standards. Tax-effect accounting is not required. (LO3, LO4, LO5, LO7) 2 Oxford Copper Limited (Oxford) acquired the Charity mining property for $13.5 million in 2017 and treated it as an area of interest. The company began exploring for ore and incurred the following costs in 2017: Geological studies $65000 Exploratory drilling 345 000 Sampling 192000 Economically recove rable reserves of 22 million tonnes of ore were confirmed by geologists in late December 2017. Geologists estimate that once ore extraction commences, the Charity area of interest will be operational for approximately 12 years, after which the ore deposit will be exhausted. The land has an estimated residual value of $160000. It is company policy and a community expectation that all mine equipment will be removed when the ore deposit is exhausted and the mine site restored to its original condition. During 2018 the company spent $675000 developing the property and $1746 000 on capital assets, as follows: Costs Estimated life Mine buildings $421000 18 years Railroad and associated equipment Other mine equipment 25 years 905000 10 years 420000 The buildings, railroad and associated equipment cannot be economically removed from the mine location, but the other mine equipment can be removed and has alternative uses. On 31 December 2018 it is estimated that development and construction activities have resulted in $1.2 million of future restoration costs. A discount rate of 8% is identified by the company as best reflecting the risk and commercial conditions associated with the Charity area of interest Production commenced on 1 January 2019. The details of operations during the period 1 January 2019 to 31 December 2019 are summarised below. Tonnes of ore mined 1460000 Tonnes of ore sold (at $10 per tonne) 1320000 Production costs (excluding depreciation and amortisation) $2 120000 $ 215000 Administration expenses Selling expenses $136000 Income tax expense $1 180000 $ 493000 Restoration costs Required Prepare an extract from the statement of comprehensive income showing profit after tax for Oxford Copper Ltd for the year ended 31 December 2019 in accordance with AASB 6 and other relevant Australian accounting standards. Tax-effect accounting is not required. (LO3, LO4, LO5, LO7)