On January 1, 2019, a company completed construction of a nuclear power plant. The total cost of the facility was $7,200,000 and had a 22-year useful life. At the end of the facility’s useful life, the plant has to be decommissioned at an expected cost of $2,750,000. The relevant discount rate is 5%. The company uses the straight-line method to depreciate its property plant and equipment. Required a) What will be the interest expense accrued on the asset retirement obligation and the depreciation expense in 2019 and 2020? Only perform the calculations, you do not need to do the journal entries in this step.
On January 1, 2019, a company completed construction of a nuclear power plant. The total cost of the facility was $7,200,000 and had a 22-year useful life. At the end of the facility’s useful life, the plant has to be decommissioned at an expected cost of $2,750,000. The relevant discount rate is 5%. The company uses the straight-line method to depreciate its property plant and equipment. Required a) What will be the interest expense accrued on the asset retirement obligation and the depreciation expense in 2019 and 2020? Only perform the calculations, you do not need to do the journal entries in this step.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 13P
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| On January 1, 2019, a company completed construction of a nuclear power plant. The total cost of the facility was $7,200,000 and had a 22-year useful life. | ||||||||||||||||||
| At the end of the facility’s useful life, the plant has to be decommissioned at an expected cost of $2,750,000. The relevant discount rate is 5%. | ||||||||||||||||||
| The company uses the straight-line method to |
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| Required | ||||||||||||||||||
| a) What will be the interest expense accrued on the asset retirement obligation and the depreciation expense in 2019 and 2020? Only perform the calculations, you do not need to do the journal entries in this step. | ||||||||||||||||||
| b) In 2037, due to advances in technology, management estimates that the cost to decommission the plant will only be $750,000. | ||||||||||||||||||
| Write the |
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