Question

1. A firm incurred the $100,000 in acquisition costs, $70,000 in exploration costs, $150,000 in development costs, and $80,000 in restoration costs.  It expects to recover 500,000 units of natural resources from the project.  Record the journal entries for the following events and explain how you calculated your amounts.  Assume the firm expects a successful project and capitalizes acquisition costs.
2. 1. Completion of all acquisition activities.
   2. 1. Completion of exploration.
   3. 2. Completion of development
   4. 3. Completion of restoration
   5. 4. Prepares a balance sheet after selling 50,000 units of the natural resource
   7. 5. Provide a conceptual discussion of how the firm would revise the accounting for the natural resource if it determined that it would only be able to recover 400,000 units of the natural resources
   8. Assume this is a small firm and their sole investment was in this project and decided to return part of the stockholders' capital investment to them.  It paid them a cash dividend of $150,000, $50,000 was a return on their investment and $100,000 was based on accumulated earnings from the project.  Prepare the journal entry to record this dividend and explain how you determine the amounts.

Answer 1

	$
Acquisition cost	1,00,000
Exploration cost	70,000
Developed cost	1,50,000
Restoration cost	80,000
Intangible Cost	4,00,000
As an intangible assets and It is expected that will recover 5,00,000 of natural resources from the project.
So amortise will also be done based on economic benefit expected over its expected period of time.
Journal Entry
	$	$
Intangible Assets	4,00,000
Cash		4,00,000
Amortization expenses	40,000					400000/500000*50000=40000
Intangible Assets		40,000
Balance Sheet (After selling 50000 unit )
Assets	$
Current Assets
Cash	5,00,000					50000*10=500000
Non Current Assets
Intangible Assets	3,60,000					400000-40000=360000
Total	8,60,000
Equity & Liabilities
Shareholders Equity	8,60,000
Total	8,60,000
Notes:
(i) Assumed unit sold at $ 10 each.
(If it is determine that only 400000 unit will recover)
Journal Entry
	$	$
Intangible Assets	4,00,000
Cash		4,00,000
Amortization expenses	50,000					400000/400000*50000=50000
Intangible Assets		50,000
Balance Sheet (After selling 50000 unit )
Assets	$
Current Assets
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