Question

A company acquires a mine and incurs costs such as expenditures to build tunnels and shafts before production may begin. These expenditures are classified as?

1) exploration costs
2) acquisitions costs
3) development costs
4) restoration costs

Answer 1

Expenditures made to build tunnels and shafts before production begins in a newly acquired mine are classified as development costs. They represent the investment made to prepare a site for the operational phase of natural resource extraction.

Step-by-step explanation:

The expenditures incurred to build tunnels and shafts before production begins in a mine that a company acquires are classified as development costs. Development costs are investments made to prepare land, mines, and other sites for extraction and processing of natural resources. These costs typically include infrastructure development and the construction necessary to make the site operational for production. This is distinct from exploration costs, which are associated with discovering resources, acquisition costs, the cost to acquire the rights to the resources, and restoration costs, which pertain to the rehabilitation of the site post-extraction.