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Calegari Mining paid $2 million to obtain the rights to operate a coal mine in Tennessee. Costs of exploring for the coal deposit totaled $1,500,000, and development costs of $5 million were incurred in preparing the mine for extraction, which began on January 2, 2024. After the coal is extracted in approximately five years, Calegari is obligated to restore the land to its original condition. The company's controller has provided the following three cash flow possibilities for the restoration costs:

	Cash Flow	Probability
1.	$ 1,000,000	10%
2.	1,400,000	60%
3.	1,800,000	30%

The companys credit-adjusted, risk-free rate of interest is 7%, and its fiscal year ends on December 31.

Note: Use appropriate factor(s) from the tables provided. Round other intermediate calculations to the nearest whole dollar. Enter your answers in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1. What is the initial cost of the coal mine?
2. How much accretion expense will Calegari report in its 2024 and 2025 income statements?
3. What is the book value of the asset retirement obligation that Calegari will report in its 2024 and 2025 balance sheets?
4. Assume that actual restoration costs incurred in 2029 totaled $1,370,000. What amount of gain or loss will Calegari recognize on retirement of the liability?

   Note: Loss amount should be indicated by a minus sign.

   	2024 2025 1. Cost of coal mine 2. Accretion expense 3. Book value 4.

Calegari Mining paid $2 million to obtain the rights to operate a coal mine in Tennessee. Costs of exploring for the coal deposit totaled $1,500,000, and development costs of $5 million were incurred in preparing the mine for extraction, which began on January 2,2024 . After the coal is extracted in approximately five years, Calegari is obligated to restore the land to its original condition. The company's controller has provided the following three cash flow possibilities for the restoration costs: The company's credit-adjusted, risk-free rate of interest is 7%, and its fiscal year ends on December 31. Note: Use appropriate factor(s) from the tables provided. Round other intermediate calculations to the nearest whole dollar. Enter your answers in whole dollars. (FV of \$1, PV of \$1. FVA of \$1. PVA of \$1. FVAD of \$1 and PVAD of \$1) Required: 1. What is the initial cost of the coal mine? 2. How much accretion expense will Calegari report in its 2024 and 2025 income statements? 3. What is the book value of the asset retirement obligation that Calegari will report in its 2024 and 2025 balance sheets? 4. Assume that actual restoration costs incurred in 2029 totaled $1,370,000. What amount of gain or loss will Calegari recognize on retirement of the liablity? Note: Loss amount should be indicated by a minus sign

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