On 2020 05 15 Nunda Phenol Products (NNDPP) purchased a small chemnical refinery. The accountants estimated that the present cost to retire that asset at the end of June in 2040 (its scheduled end of life) would be $3.540 m. Chemical industry expert Josiah Carberry forecasts a 2.7% rate of inflation for the necessary work, and that a contractor would include $620 K MRP to lock in the price of doing the work twenty years in the future. The risk-free rate (rF) was 2.2 % and NNDPP's credit standing commanded a 310 bps spread to rF. Sarah Verhovek, the NNDPP controller, calculates ARO liabilities using continuous discounting and the 30/360 convention. For the ARO, she will book a Cr. of ($ m) O 2635
On 2020 05 15 Nunda Phenol Products (NNDPP) purchased a small chemnical refinery. The accountants estimated that the present cost to retire that asset at the end of June in 2040 (its scheduled end of life) would be $3.540 m. Chemical industry expert Josiah Carberry forecasts a 2.7% rate of inflation for the necessary work, and that a contractor would include $620 K MRP to lock in the price of doing the work twenty years in the future. The risk-free rate (rF) was 2.2 % and NNDPP's credit standing commanded a 310 bps spread to rF. Sarah Verhovek, the NNDPP controller, calculates ARO liabilities using continuous discounting and the 30/360 convention. For the ARO, she will book a Cr. of ($ m) O 2635
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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