Acct 301 db 4 | Accounting homework help
For this collaborative discussion board, the instructor will place you into a group at the beginning of the course. You will create a thread in response to the provided prompt for each forum. Each thread must be at least 500 words and demonstrate course-related knowledge. You must support your assertions with at least 2 citations other than the textbooks; the Bible may be 1 of those sources. The composition must be attached as a word document within a new thread of the forum. Put the chapter and case in the subject line of your thread, as in “Chapter 1 Case 1-1.” In addition to the thread, the student will reply to the thread of at least 1 classmate. The reply must be at least 250 words. Citations for the replies are not required, but are encouraged. Everything must be in current APA format.
Note: Due to constant updates and revisions, you must always consult the most current style guide in completing citations and formatting. The sample provided is the work of a student and must not be used as an official sample.
Submit your thread by 11:59 p.m. (ET) on Thursday of the assigned modules/weeks, and submit your reply by 11:59 p.m. (ET) on Monday of the same modules/weeks.
Research Case 10–2 FASB codification; locate and extract relevant information and cite authoritative support for a financial reporting issue; restoration costs; asset retirement obligation
Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2018. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.
The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities.
Cash Outflow Probability
$3 million 20%
4 million 30%
5 million 25%
6 million 25%
Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue.
Obtain the relevant authoritative literature on accounting for asset retirement obligations using the FASB Accounting Standards Codification. You might gain access at the FASB website (www.fasb.org). Explain the basic treatment of asset retirement obligations. What are the specific citations that you would rely on to determine (a) the accounting treatment for an asset retirement obligation and (b) how to measure the obligation?
Determine the capitalized cost of the coal mine.
Prepare a summary journal entry to record the acquisition costs of the mine.
How much accretion expense will the company record in its income statement for the 2018 fiscal year, related to this transaction? What are the specific citations from the FASB Accounting Standards Codification that address (a) the calculation of accretion expense and (b) the classification of accretion expense in the income statement?
Explain to Alice how Hazelton would account for the restoration if the restoration costs differed from the recorded liability in three years. By way of explanation, prepare the journal entry to record the payment of the retirement obligation in three years assuming that the actual restoration costs were $4.7 million.
Describe to Alice the necessary disclosure requirements for the obligation. What is the specific citation from the FASB Accounting Standards Codification that contains these disclosure requirements?