Question

Herb Corporation acquires a gold mine at a cost of $403,000. Development costs that were incurred total $106,000, including $11,300 of depreciation on movable equipment to construct mine shafts. Based on construction to date, the legal obligation to restore the property after the mine is exhausted has a present value of $74,100. Herb has publicly pledged an additional $21,000 (present value) for improved reclamation of the area surrounding the mine.

Prepare the journal entries to record the cost of the natural resource if Herb prepares financial statements in accordance with IFRS. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

_____________

______________

(To record purchase of a gold mine.)

_________________

__________________

(To record movable equipment entry.)

____________________

____________________

( To record property reclamation obligation.)

Answer 1

The journal entries to record the cost of the natural resource if Herb prepares
financial statements in accordance with IFRS
	Account Titles & explanations	Debit	Credit
	Gold mine	$403,000
	Cash		$403,000
	(To record purchase of gold mine)
	Gold Mine	$94,700
	Cash		$94,700
	(To record development cost of mine)
	Depreciation	$11,300
	Accumulated Depreciation		$11,300
	(To record depreciation for movable equipment)
	Gold mine	$95,100
	Property reclamation obligation		$95,100
	(To record property reclamation obligation)
	Property reclamation obligation is the present value of the future cost
	to restore the property after the mine is exhaust. This cost is debited to the
	mine cost
	Legal obligation	$74,100
	Publicaly pledged additional cost	$21,000
	Total Property reclamation obligation	$95,100