QUESTION 2
Krusty Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $8.2 million. Extraction activities began on July 1, 2024. After the copper is extracted in approximately six years, Krusty is obligated to restore the land to its original condition, including constructing a park. The companys controller has provided the following three cash flow possibilities for the restoration costs:
	Cash Flow	Probability
1	$700,000	30%
2	800,000	25%
3	900,000	45%
The companys credit-adjusted, risk-free rate of interest is 5%, and its fiscal year ends on December 31.
Note: Use appropriate factor from the tables provided or the present value function. Round other intermediate calculations to the nearest whole dollar.
Required: SHOW YOUR WORK
1.What is the initial cost of the copper mine?
2.How much accretion expense will Schefter report in its 2024 income statement?
3.What is the book value of the asset retirement obligation that Schefter will report in its 2024 balance sheet?
4.Assume that actual restoration costs incurred in 2030 totaled $860,000. What amount of gain or loss will Krusty recognize on retirement of the liability?