Explain why the landscaping provision in the case

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Question: At 1.1.20X0, Peterlee acquired an iron ore mine at a cost of $20 million. In addition, when all the ore has been extracted (estimated ten years' time) the company will face estimated costs for landscaping the area affected by the mining that have a present value of $2.5 million. These costs would still have to be incurred even if no further ore was extracted. Cost of capital 8%. Useful life of the asset is 10 years.

Required:

i, Explain, with journals, the accounting treatment for the transactions above for the financial statement ended 31.12.20X0 ?

ii, Prepare extract financial statement for year ended 31.12.20X0?

iii, Explain why the landscaping provision in the case should be classified as non-current liability in statement of financial position as at 31 December 20X0?

Reference no: EM133432251

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