Question

On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.5 million. Additional costs and purchases included the following (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Development costs in preparing the mine $ 2,700,000 Mining equipment 122,500 Construction of various structures on site 45,000 After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $10,000. The structures will be torn down. Geologists estimate that 750,000 tons of ore can be extracted from the mine. After the ore is removed the land will revert back to the state of New Mexico. The contract with the state requires Hecala to restore the land to its original condition after mining operations are completed in approximately four years. Management has provided the following possible outflows for the restoration costs: Cash Outflow Probability $ 550,000 30% 650,000 30% 750,000 40% Hecala’s credit-adjusted risk-free interest rate is 8%. During 2021, Hecala extracted 115,000 tons of ore from the mine. The company’s fiscal year ends on December 31.

How much accretion expense will the company record in its income statement for the 2021 fiscal year?

How much accretion expense will the company record in its income statement for the 2021 fiscal year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)

	Accretion expense

Answer 1

Aniwer Accretion Exaconse_pill be le coy.Olmed_by_Heculo ml4l99 Live its income statement for the 2021_f.jšcy_)_year... In the cooback_its given thal_Hefale_m1mg has to restore the lood at it original such restoration will costs to Hecala mining which is given Present Value of Restoration costs at the end of 4 years f(350000.130%) + (61000 X 3021 x T y t (FNB X 40%2_ 1 11.087 0.7350 : (165000 + 195000 + 300000) x i 660002_X 0.7350 : € 485/20 - Accretion costs = pv of of 2021 for 8 months Restoration Corts X 8 months x 12 months 8% : : $ 485120 x - 8 months 12 months X 8%. 1 = $ 25873 i Hecela mining company will record $ 25873_95 _accretion expense in 2011 in its income statement