Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $8.2 million. Extraction activities began on July 1, 2018. After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The company's controller has provided the following three cash flow possibilities for the restoration costs:
$\begin{array}{rrr}&\text { Cash Flow } & \text { Probability }\
\text { 1. } & \$ 700,000 & 30 \% \
\text { 2. } & 800,000 & 25 \% \
\text { 3. } & 900,000 & 45 \%
\end{array}$
The company's credit-adjusted, risk-free rate of interest is 5%, and its fiscal year ends on December 31.
Required:
1. What is the initial cost of the copper mine? (Round computations to nearest whole dollar.)
2. How much accretion expense will Schefter report in its 2018 income statement?
3. What is the book value of the asset retirement obligation that Schefter will report in its 2018 balance sheet?
4. Assume that actual restoration costs incurred in 2024 totaled $860,000. What amount of gain or loss will Schefter recognize on retirement of the liability?

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The Answer of Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $8.2 million. Extraction activities began on July 1, 2018. After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The company's controller has provided the following three cash flow possibilities for the restoration costs:
$\begin{array}{rrr}&\text { Cash Flow } & \text { Probability }\
\text { 1. } & \$ 700,000 & 30 \% \
\text { 2. } & 800,000 & 25 \% \
\text { 3. } & 900,000 & 45 \%
\end{array}$
The company's credit-adjusted, risk-free rate of interest is 5%, and its fiscal year ends on December 31.
Required:
1. What is the initial cost of the copper mine? (Round computations to nearest whole dollar.)
2. How much accretion expense will Schefter report in its 2018 income statement?
3. What is the book value of the asset retirement obligation that Schefter will report in its 2018 balance sheet?
4. Assume that actual restoration costs incurred in 2024 totaled $860,000. What amount of gain or loss will Schefter recognize on retirement of the liability?

Schefter Mining Operates a Copper Mine in Wyoming The Company's Credit-Adjusted, Risk-Free Rate of Interest Is 5%, and and Development