Proper accounting for restoration cost
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LoJo Developers Inc. purchased a coal mine for $10,000,000. As a condition of the purchased, LoJo agreed to restore the land after mining operations ceased. Restoration costs are estimated at $2,500,000. The proper accounting for these restoration cost is:
o Expense them as incurred.
o Capitalize and depreciate them over the estimated life of the mine.
o Add them into the depletion base of the mine.
o Subtract them from the depletion base of the mine.
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