X Company purchases exploration rights for A on January 1, 2019 and has responsibility to restore the land after extraction is complete by December 31, 2026 (i.e., 8 years). There is a 40% chance restoration will cost $700,000, a 50% chance restoration will cost $900,000, and a 10% chance restoration will cost $1,500,000. All other costs associated with the A deposit total $1,750,000. The applicable interest rate is 8%.

a).  What does company X record for cost of A?

b). Suppose the balance of X Company's asset retirement obligation on January 1, 2024, is $646,826. What does X record as accretion expense for the fiscal year ending December 31, 2024?

Answer rating: 100% (QA)

Part 1 Restoration Cost Multiply Probability Expected Value 40 chance 700000 40 280000 50 chance ... View the full answer