On January 1, 2016, the

Winderl

Mining Co. paid $50 million for a copper mine owned by

the state of Wyoming. To obtain the mine, Winderl agreed to restore the land to a suitable condition

for other uses after its exploration and extraction activities.

The company’s credit-adjusted risk free interest rate is 6%. It estimates the possible cash flows for

restoring the land, three years after its extraction activities begin, as follows:

Cash outflow

Probability

$5 million

40%

$10 million

60%

What journal entry should Winderl make for the initial acquisition of the copper mine?

On December 31, 2016?

On January 1, 2019, assuming that it pays $6,000,000 to restore the land on that date?

Answer rating: 100% (QA)

Journal Entry for the Initial Acquisition of the Copper Mine on January 1 ... View the full answer