The asset retirement obligation (rounded) that should be recognized by MMC at the beginning of the extraction activities is:
A)$ 8.2 million
B)$14.7 million
C)$ 18 million
D)$ 30 million The present value of the expected cash flows, that is, 0.81630 [(.60 $10 million) + (.40 $30 million)], which is $14,693,400 or $14.7 million (rounded).

Question

Quizplus · Accepted Answer

The asset retirement obligation should be recognized at the beginning of the extraction activities, based on the present value of the expected cash flows. The calculation gives a result of $14.7 million, which is closest to option B, therefore, that is the correct choice.

The Asset Retirement Obligation (Rounded) That Should Be Recognized by MMC