Question

Question 6 (1 point) On March 1, 2018, Shipley Resources entered into an agreement with the state of Alaska to obtain the rights to operate a mineral mine for $6 million. The mine is expected to produce 100,000 tons of mineral. As part of the agreement. Shipley agrees to restore the land to its original condition after mining operations are completed in approximately five years. Management has provided the following possible outflows for the restoration costs that will occur five years from now Cash Outflow Probability $300,000 25% 400,000 50% 500,000 25%

Answer 1

solution. Given that I Cash out flow $300,000 I table probability 25% 50% 400,000 500,000 25% » $ 300,000 425% : $300,000x 025 $75,000 => 4400,000 x 50% 400,000 X0.5 200,000 -1 1500,000x95% 500,000 X 0.95 - 125,000 58 400.,000 X0.62092 = $248,368 : ( Paesent value of $4 , 1:5, 92101,) 2018 accde tion expense: $248,368 x 0.10 x 10/22 = $20, 697

en 10/12 meanz period from 01/03/2018 to 31/12/2018 of 10 monthy we have to take period of 10 mordly of 12 of fiscal year since the agreement was entered upon on maach 34.