Answer:
(a) The asset would be recorded in accordance to IAS 16 Property, plant & equipment.
Dr Mining Asset 896,900
Cr Bank 896,900
(b) IAS 16 says that the costs incurred to make the asset ready for use must be capitalized as part of the asset. This means the license fee $1000 filing fee, License fee $2100 and $50,000 amount paid for geological survey must be capitalized. So the entry is as under:
Dr Mining asset (1k+2.1k+50k) $53,100
Cr Bank $53,100
(c) This assets must be depreciated on the basis of tons of minerals extracted which is 60 thousands tons in the first year.
Depreciation Expense = (60k tons / 500k tons) * (Total capitalized cost)
=(60,000/500,000) * (896,900+53,100) = $108,000
The Double entry of Depreciation Expense would be as under:
Dr Depreciation Expense $108,000
Cr Accumulating Depreciation $108,000
