• PTL Ltd is a mining company. During the reporting period ending 30 June 2022, PTL Ltd started mining operations in Western Australia. The cost of the mining equipment and associated technology amounted to $100 million. The mine commenced production on 1 July 2022. At the end of the mine's useful life, which is expected to be 10 years, PTL Ltd is required to restore the mining site and remove it by removing equipment. PTL Ltd estimates that if such work were required to be done at the present time it would cost $10 million. The costs of this work are expected to increase by an average inflation rate of 3% per year over the next 10 years. The rate on 10-year government bonds 4% reflects the relevant time value of money

Calculate the amount of provision as of 30 June 2022 and provide an analysis of the calculation.

Answer rating: 100% (QA)

To calculate the amount of provision as of 30 June 2022 for the restoration and removal of the mining site we need to consider the present value of th... View the full answer