During the year LM ltd acquired an iron ore mine at a cost of GHS6m. In addition, when all the ore has been extracted (estimated ten years' time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of GHS2m. These costs will still be incurred even if no further ore is extracted. How should this GHS2m future cost be recognised in the financial statements? A. Provision GHS2m and GHS2m capitalised as part of cost of mine B. Provision GHS2m and GHS2m charged to operating costs C. Accrual GHS200,000 per annum for next ten years D. Should not be recognised as no cost has yet arisen
During the year LM ltd acquired an iron ore mine at a cost of GHS6m. In addition, when all the ore has been extracted (estimated ten years' time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of GHS2m. These costs will still be incurred even if no further ore is extracted. How should this GHS2m future cost be recognised in the financial statements? A. Provision GHS2m and GHS2m capitalised as part of cost of mine B. Provision GHS2m and GHS2m charged to operating costs C. Accrual GHS200,000 per annum for next ten years D. Should not be recognised as no cost has yet arisen
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter9: Depreciation (deprec)
Section: Chapter Questions
Problem 1R: Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an...
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During the year LM ltd acquired an iron ore mine at a cost of GHS6m. In addition, when all the ore has been extracted (estimated ten years' time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of GHS2m. These costs will still be incurred even if no further ore is extracted. How should this GHS2m future cost be recognised in the financial statements?
A. Provision GHS2m and GHS2m capitalised as part of cost of mine
B. Provision GHS2m and GHS2m charged to operating costs
C. Accrual GHS200,000 per annum for next ten years
D. Should not be recognised as no cost has yet arisen
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