DMH Industries Limited purchased a strip mine for cash on April 1, 2023 at a cost of $5,787,000. DMH expects to operate the minefor 10 years, at which it is legally required to restore the surrounding area to its original state. It is estimated that it will cost $477,000to do this at the end of the mine's useful life. The company's year-end is December 31, and DMH follows ASPE.(a)Your Answer Correct AnswerYour answer is correct.Prepare the journal entry to record the purchase of the mine and to record the asset retirement obligation for the mine on April 1,2023. Based on the effective interest rate of 5%, the present value of the asset retirement obligation (i.e., its fair value) on thedate of acquisition is $292,837. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)(b)Date Account Titles and ExplanationApr. 1,2023eTextbookMineral ResourcesAsset Retirement ObligationeTextbook and MediaCashList of AccountsYour answer is partially correct.Dec.31,2023Date Account Titles and ExplanationDec.31,2023Depreciation ExpenseAccumulated Depreciation - Mineral Resources(To record depletion for the year)Accretion ExpensePrepare any journal entries required for the mine (straight-line depreciation) and the asset retirement obligation at December 31,2023. The estimated residual value of the mine is zero. (Round answers to O decimal places, e.g. 5,275. Credit account titles areautomatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry isrequired, select "No Entry" for the account titles and enter O for the amounts.)Asset Retirement ObligationDebit(To record accretion expense for the year)6079837Debit578700Credit146422928375787000Assistance UsedAssistance UsedAttempts: 3 of 3 usedCredit57870014642

Depreciation is referred to a method of expensing the cost of a capital asset over its useful life.…

DMH Industries Limited purchased a strip mine for cash on April 1, 2023 at a cost of $5,787,000. DMH expects to operate the mine for 10 years, at which it is legally required to restore the surrounding area to its original state. It is estimated that it will cost $477,000 to do this at the end of the mine's useful life. The company's year-end is December 31, and DMH follows ASPE. (a) Your Answer Correct Answer Your answer is correct. Prepare the journal entry to record the purchase of the mine and to record the asset retirement obligation for the mine on April 1, 2023. Based on the effective interest rate of 5%, the present value of the asset retirement obligation (i.e., its fair value) on the date of acquisition is $292,837. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) (b) Date Apr. 1, 2023 Account Titles and Explanation Mineral Resources e Textbook Asset Retirement Obligation Cash eTextbook and Media List of Accounts Your answer is partially correct. Debit 6079837 Credit 292837 5787000 Assistance Used Assistance Used Attempts: 3 of 3 used Prepare any journal entries required for the mine (straight-line depreciation) and the asset retirement obligation at December 31, 2023. The estimated residual value of the mine is zero. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 10P: Petes Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of...