Having qualified as a mining engineer Violet decides that she would like to go into the gold mining business. She spends a considerable period of time looking for mining opportunities. Finally she...

Having qualified as a mining engineer Violet decides that she would like to go into the gold mining business. She spends a considerable period of time looking for mining opportunities. Finally she finds a piece of land in Wales which was formerly exploited for gold mining. The activity had been abandoned some years ago because the yield was insufficient. However, Violet is convinced that the mine can once more be made profitable with the help of modern equipment and technology. She enters negotiations with the owners of the land. They refuse to sell it, but agree to grant Violet the rights for a 3.5 year period from 1 January 2012. In exchange Violet agrees to pay £273 000, plus a fixed fee per kilo of gold extracted. How will the purchase of the mineral rights be reflected in Violet’s accounts for the year to 31 December 2012?



May 26, 2022
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