Berrill Ltd Is a Mining Firm Incorporated on 1 July

question 13

Multiple Choice

Berrill Ltd is a mining firm incorporated on 1 July 2012 to engage in the exploration of iron ore in southern New South Wales.On 30 June 2013 the records show that the entity had incurred the following exploration and evaluation costs for area of interest A and area of interest B.
$$\begin{array} { | l | l | l | } \hline & \text { Area of interest } \mathrm { A } & \text { Area of interest B } \\\hline \text { Acquisition costs - mining tenements } & \$ 100000 & \$ 200000 \\\hline \text { Exploration costs } & 300000 & 200000 \\\hline \text { Evaluation costs } & 200000 & 100000 \\\hline \text { Total } & \$ 600000 & \$ 500000 \\\hline\end{array}$$ On 30 June 2013 area of interest B was evaluated by the board of directors to be not economically feasible and abandoned the site.
What is the effect of the above transactions on the statement of financial position and the statement of comprehensive income of Berrill Ltd using the area-of-interest method?

• A)
• \[\begin{array} { | l | l | }
• \hline \text { Statement of financial position } & \text { Statement of comprehensive income } \\
• \hline \text { Increase asset by } \$ 1.1 \text { million } & \text { No effect } \\
• \hline
• \end{array}\]
• B)
• \[\begin{array} { | l | l | }
• \hline \text { Statement of financial position } & \text { Statement of comprehensive income } \\
• \hline \text { Increase asset by } \$ 0.6 \text { million } & \text { Increase expense by } \$ 0.5 \text { million } \\
• \hline
• \end{array}\]
• C)
• \[\begin{array} { | l | l | }
• \hline \text { Statement of financial position } & \text { Statement of comprehensive income } \\
• \hline \text { Increase asset by } \$ 0.5 \text { million } & \text { Increase expense by } \$ 0.6 \text { million } \\
• \hline
• \end{array}\]
• D)
• \[\begin{array} { | l | l | }
• \hline \text { Statement of financial position } & \text { Statement of comprehensive income } \\
• \hline \text { Increase asset by } \$ 0.5 \text { million } & \text { No effect } \\
• \hline
• \end{array}\]

---

Definitions:

Form 1099

A tax form in the United States used to report various types of income other than wages, salaries, and tips.

Tax Form

An official document used for reporting financial information to a governmental body, particularly for tax purposes.

Payments Made

The total amount of money disbursed by a company to settle its obligations, such as bills, invoices, or salaries.

Vendors List

A compiled list or database of suppliers and service providers that a company purchases from or contracts with.