Bailey's Gold Mines Inc.(BGMI)purchases a piece of land for the purpose of developing a gold mine.BGMI is legally required to remove all structures and convert the mine site to a wildlife sanctuary at the end of its estimated 10-year useful life.BGMI estimates that it will have to spend $11,000,000 to decommission the site and reclaim the land when operations cease.The present value of this $11,000,000 site restoration cost,assuming a discount rate of 5%,is $6,753,046.BGMI uses straight-line depreciation.
Required: Prepare the journal entries to recognize this site restoration cost the company would record upon initial acquisition and subsequently.

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The Answer of Bailey's Gold Mines Inc.(BGMI)purchases a piece of land for the purpose of developing a gold mine.BGMI is legally required to remove all structures and convert the mine site to a wildlife sanctuary at the end of its estimated 10-year useful life.BGMI estimates that it will have to spend $11,000,000 to decommission the site and reclaim the land when operations cease.The present value of this $11,000,000 site restoration cost,assuming a discount rate of 5%,is $6,753,046.BGMI uses straight-line depreciation.
Required: Prepare the journal entries to recognize this site restoration cost the company would record upon initial acquisition and subsequently.