Question

GeoMines Corp. has the following costs related to a mine it acquired this year. Cost of land and natural resource rights $100,000 Development cost before production begins 20,000 Future cost to restore land after mining 15,000 Equipment used for mining 80,000 Exploration and drilling costs 30,000 What amount should be included as an asset for natural resources

Answer 1

Answer:

$165,000

Explanation:

The cost of an asset is derived by considering every cost related to the purchase of an item and putting the asset to use, These costs include the original purchase price , site preparation ,transportation ,installation and testing , warranties and the future cost of restoring dismantling and restoring the land at the completion of its useful life time.

Looking at the given scenario , the related cost of the natural resources as an asset are the cost of the land and the natural resources , development cost ,future cost of land restoration and the cost of exploration and drilling.

The depreciation value of the equipment used for mining will be charged as an expense for the operation year.

Cost of natural resources = 100,000+20,000+15,000+30,000=165,000