Problem
Pharoah Products Limited leases property on which copper has been discovered. The lease provides for an immediate payment of $471,920 to the lessor before drilling has begun and an annual rental of $54,940. In addition, the lessee is responsible for cleaning up the waste and debris from drilling and for the costs associated with reconditioning the land for farming when the mine is abandoned. It is estimated that the legal obligation related to cleanup and reconditioning has a present value of $45,820. Pharoah Products has publicly pledged an additional $29,600 (present value) to reclaim the area surrounding the mine. Pharoah Products prepares financial statements in accordance with IFRS. Determine the amount that should be capitalized in the Mineral Resources asset account as a result of the lease agreement. Determine the amount that should be capitalized in the Mineral Resources asset account as a result of the lease agreement. Assume Pharoah Products prepares financial statements in accordance with ASPE.