Flint Corp. erected and placed into service an offshore oil platform on January 1, 2023, at a cost of $10 million. Flint is legally required to dismantle and remove the platform at the end of its eight-year useful life. Flint estimates that it will cost $1.0 million to dismantle and remove the platform at the end of its useful life and that the discount rate to use should be 10% . Using (a) factor Table A.2, (b) a financial calculator, or (c) Excel function PV, prepare the entry to record the asset retirement obligation. Assume that none of the $1.0 million cost relates to production. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Click here to view the factor table. Click here to view the factor table. Account Titles and Explanation Debit Credit

Flint Corp. erected and placed into service an offshore oil platform on January 1, 2023, at a cost of $10 million. Flint is legally required to dismantle and remove the platform at the end of its eight-year useful life. Flint estimates that it will cost $1.0 million to dismantle and remove the platform at the end of its useful life and that the discount rate to use should be 10% . Using (a) factor Table A.2, (b) a financial calculator, or (c) Excel function PV, prepare the entry to record the asset retirement obligation. Assume that none of the $1.0 million cost relates to production. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Click here to view the factor table. Click here to view the factor table. Account Titles and Explanation Debit Credit

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

See similar textbooks

Similar questions

Amazon purchased a piece of land for $5 million and plans to build a $25 million distribution warehouse to be put to service on Sept 3d 2022. Develop the depreciation table for this property for the first 10 years of its service life. What would the tax liability be if this facility was sold to Target for $18 million in Sept 15th 2032? The federal corporate rate is 21% and the capital gains rate is 15%. 3.
Big Cat Exploration erected an oil platform in a remote area of Texas at a cost of $10 million. Bit Cat is legally required to dismantle and remove the platform at the end of its useful life, which is expected to be 10 years. Big Cat estimates that the cost of dismantling and removing the oil rig will be $700,000. Assume that the appropriate discount rate is 8%.
On March 1, 2024, a company entered into an agreement with the state to obtain the rights to operate a mineral mine for $6 million. The mine is expected to produce 155,000 tons of mineral. As part of the agreement, the company agrees to restore the land to its original condition after mining operations are completed in approximately five years. Management has provided the following possible outflows for the restoration costs that will occur five years from now: (PV of $1. PVA of $1) Cash Outflow $ 520,000 675,000 830,000 Probability 20% 30% 50% The company's credit-adjusted risk-free interest rate is 9%. During 2024, the company extracted 27,900 tons of ore from the mine. How much accretion expense will the company record in its income statement for the 2024 calendar year? Multiple Choice
DEF Corporation built a factory that produces widgets at a cost of $100 million. The factory began its operation on January 1, 2022. The factory has a licensed to be in operations for 30 years and after that, the factory must be demolished and disposed of. At January 1, 2022, the cost of demolishing the factory was estimated to be $20 million. An appropriate discount rate is 5%, when the present value of $1 is $0.2314 in 30 years’ time. Requirement a.) What is the value of the provision in the statement of financial position at December 31, 2022 b.) What is the carrying amount of the factory at December 31, 2022?
On December 1, 2021, HP Corp. is contemplating to invest into a new equipment costing P2,500,000 plus an installation cost of P200,000 to replace its old equipment that has a book value of P400,000 and a remaining useful life of 4 years. The estimated useful life of the new equipment is 4 years and has a salvage value of P500,000. If the company will favor the replacement decisions, the old equipment can be sold for P150,000 but additional working capital investment must be made amounting to P400,000. However, the company must incur a repair cost of P180,000 to continuously use the old equipment. The annual cash operating costs of the old equipment is P4,000,000 while the annual cash operating cost of the new equipment is P2,400,00. At the end of the useful life, cost to remove the new equipment will amount to P100,000. The company uses a tax rate of 35%, requires a payback period is 2.5 years or less, and accepts a minimum accounting rate of return is 15%. Compute for the net…
On December 1, 2021, HP Corp. is contemplating to invest into a new equipment costing P2,500,000 plus an installation cost of P200,000 to replace its old equipment that has a book value of P400,000 and a remaining useful life of 4 years. The estimated useful life of the new equipment is 4 years and has a salvage value of P500,000. If the company will favor the replacement decisions, the old equipment can be sold for P150,000 but additional working capital investment must be made amounting to P400,000. However, the company must incur a repair cost of P180,000 to continuously use the old equipment. Annual cash operating costs of the old equipment is P4,000,000 while the annual cash operating cost of the new equipment is P2,400,000. At the end of the useful life, cost to remove the new equipment will amount to P100,000 . The company uses a tax rate of 35% , requires a payback period is 2.5 years or less, and accepts a minimum accounting rate of return is 15%. Compute for the net…
Your company is contemplating the purchase of a large stamping machine. The machine will cost $167,000. With additional transportation and installation costs of $5,000 and $11,000, respectively, the cost basis for depreciation purposes is $183,000. Its MV at the end of five years is estimated as $34,000. The IRS has assured you that this machine will fall under a three year MACRS class life category. The justifications for this machine include $45,000 savings per year in labor and $29,000 savings per year in reduced materials. The before-tax MARR is 24% per year, and the effective income tax rate is 28%. Assume the stamping machine will be used for only three years, owing to the company's losing several government contracts. The MV at the end of year three is $47,000. What is the income tax owed at the end of year three owing to depreciation recapture (capital gain)? E Click the icon to view the GDS Recovery Rates (rg) for the 3-year property class. Choose the correct answer below. O…
Halcrow, Inc. hopes to replace an outdated tracking system currently installed on CNC machines. The challenger system has an initial cost of $70,000, an estimated annual operating cost of $20,000, a maximum useful life of 5 years, and a salvage value of $10,000 at any time. With an interest rate of 11% per year, determine the economic life of the service and the corresponding amount for year 6. a)-35,382.8 b.)-35,482.8 c.)-35,582.8 d.)-35,282.8
Your company is contemplating the purchase of a large stamping machine. The machine will cost $180,000. With additional transportation and installation costs of $5,000 and $10,000, respectively, the cost basis for depreciation purposes is $195,000. Its MV at the end of five years is estimated as $40,000. The IRS has assured you that this machine will fall under a three-year MACRS class life category. The justifications for this machine include $40,000 savings per year in labor and $30,000 savings per year in reduced materials. The before-tax MARR is 20% per year, and the effective income tax rate is 40%. Use this information to solve, Assume the stamping machine will now be used for only three years, owing to the company’s losing several government contracts. The MV at the end of year three is $50,000. What is the income tax owed at the end of year three owing to depreciation recapture (capital gain)? (a) $8,444 (b) $14,220 (c) $21,111 (d) $35,550 (e) $20,000.
Your company is contemplating the purchase of a large stamping machine. The machine will cost $180,000. With additional transportation and installation costs of $5,000 and $10,000, respectively, the cost basis for depreciation purposes is $195,000. Its MV at the end of five years is estimated as $40,000. The IRS has assured you that this machine will fall under a three-year MACRS class life category. The justifications for this machine include $40,000 savings per year in labor and $30,000 savings per year in reduced materials. The before-tax MARR is 20% per year, and the effective income tax rate is 40%. Use this information to solve, The PW of the after-tax savings from the machine, in labor and materials only, (neglecting the first cost, depreciation, and the salvage value) is most nearly (using the after tax MARR) (a) $12,000 (b) $95,000 (c) $151,000 (d) $184,000 (e) $193,000.
A proposed cost-saving device has an installed cost of $765,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes (MACRS schedule). The required initial net working capital investment is $67,000, the tax rate is 21 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $103,000. What level of pretax cost savings do we require for this project to be profitable? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Pretax cost savings
Use the following information to answer questions 4 and 5 (including their appropriate subsections) D. Newcombe & Associates, Inc., is considering the introduction of a new product. Production of the new product requires an investment of $140,000 in equipment that has a five-year life. The equipment has no salvage value at the end of five years and will be depreciated on a straight-line basis. Newcombe's required return is 15%, and the tax rate is 34%. The firm has made the following forecasts: Unit Sales Price per unit Variable cost per unit Fixed cost per year Base Case 2,000 $55 $22 $10,000 Lower Bound 1,800 $55 $22 $10,000 Upper Bound 2,200 $55 $22 $10,000 Question 4 (4.1) Assume the base-case forecasts for the Newcombe project. Compute the accounting break- even point.