Business, 27.12.2020 15:30, Serenitybella
Montana Mining Co. (MMC) paid 200 million for the right to explore and extract rare metals from land owned by the state of Montana. To obtain the rights, MMC agreed to restore the land to a suitable condition for other uses after its exploration and extraction activities. MMC incurred exploration and development cost of $60 million. MMC has a credit-adjusted risk free interest rate of 7%. It estimates the possible cash flows for restoring the land, 3 years after extraction activities begin, as follows:
Cash Outflow Probability
$10 million 60%
$30 million 40%
The asset retirement obligation (rounded) that should be recognized at the beginning of the extraction activities is:
The asset retirement obligation (rounded) that should be reported on the balanace sheet one year after activities begin is:
Answers: 3
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Montana Mining Co. (MMC) paid 200 million for the right to explore and extract rare metals from land...
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