Intangibles and mineral resources 12 pts 12 minutes

This preview shows page 6 - 8 out of 9 pages.

Question 5 Intangibles and mineral resources (12 pts. 12 minutes) Graystone Resources explores, develops, and produces aluminum. The company has a December 31 year end and uses the successful efforts method required under IFRS. During 2010, the company engaged in the following activities. Alpha Hills : Produced 30,000 tons of aluminum, leaving reserves of 170,000 tons at the end of 2010. The average selling price per ton was $1,150 while operating costs were $15 million at Alpha Hills. Intangible exploration costs that remain unamortized at the end of 2010 amounted to $30 million, while undepreciated tangible development costs totalled $20 million. Beta Valley : Graystone spent the entire year and $8 million developing this mine site. However, it was not yet ready for production by the end of 2010. Chi Canyon : Graystone began exploring this area for aluminum deposits in April 2010. By December 31, the company had spent $5 million on geological tests and core samples. However, whether Chi Canyon will have sufficient concentrations of aluminum to be productive remains uncertain at year end. Research and development project : Graystone was also actively engaged in developing a new way to determine the existence of aluminum deposits in a particular location. In 2010, the company spent $12 million on this project. However, the company has not yet been able to demonstrate that its approach is any more effective than existing technologies. Required: a. Record the journal entries relating to the transactions at Alpha Hills. [6 marks] b. Record the journal entries relating to the transactions at Beta Valley. Clearly identify an account as an asset or expense. [2 marks] c. Record the journal entries relating to the transactions at Chi Canyon. [2 marks] d. Record the journal entry for the research and development project. [2 marks]
Image of page 6

Subscribe to view the full document.

Question 6: Revaluation and impairment (16 marks – suggested time 16 minutes) The following provides information relating to International Cellars, a manufacturer of refrigerated wine cabinets and wine cellars. As a publicly traded company, International Cellars follows International Financial Reporting Standards (IFRS), and it has a December 31 year-end. Carrying amounts on Dec . 31, 2010 Revaluation reserves on Dec . 31, 2010 Land * $ 4,000,000 Land 1,000,000 Building ** 6,000,000 Building Nil Accum. depr. – building (1,500,000) Equipment Not applicable Equipment *** 8,000,000 Patent Not applicable Accum. depr. – equipment (5,000,000) Patent **** 500,000 Risk-adjusted discount rates Accum. amort. – patent (250,000 ) Land 8% Building 10% Total non-current assets $11,750,000 Equipment and patent 15% * The Company reports land on a revalued basis. ** The office building was acquired 10 years ago at a cost of $6 million, with estimated useful life of 40 years and depreciated straight-line (30 years remaining on Dec. 31, 2010). The Company reports buildings on a revalued basis, using the elimination method.
Image of page 7
Image of page 8

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern