Question

Manfred Mining Company is required to restore a piece of land to its original condition after it completes extraction of precious metals. From a financial reporting perspective, the related obligation is referred to as an asset _________.

a. development cost.
b. exploration obligation.
c. retirement obligation.
d. restoration cost.

Answer 1

D

Step-by-step explanation:

The term is asset restoration cost,it implies the cost of ensuring the environment where the exploration does is harmless to the residents of the area.

It is normally part of the asset costs from day one.It is expected to be discounted to present value and the discounting factor is applied to the present value each to determine the increase in asset which is added to asset value,in other words by the end of useful life,the asset would have its restoration cost required to restore the site.