Question: Meticulous Corp a leader in the commercial cleaning industry acquired

Meticulous Corp., a leader in the commercial cleaning industry, acquired and installed, at a total cost of $110,000 plus 15% HST (Harmonized Sales Tax), three underground tanks for the storage of hazardous liquid solutions needed in the cleaning process. The tanks were ready for use on February 28, 2011.
The provincial ministry of the environment regulates the use of such tanks and requires them to be disposed of after 10 years of use. Meticulous estimates that the cost of digging up and removing the tanks in 2021 will be $28,000. An appropriate interest or discount rate is 6%.
Meticulous also manufactures commercial cleaning machines that it sells to dry cleaning establishments throughout Nova Scotia. During 2011, Meticulous sold 20 machines at a price of $12,000 each plus 15% HST. The machines were sold with a three-year warranty for parts and labour. Because Meticulous has been in business since 1983, the company accountant was able to estimate that the warranty costs are likely to be 1% of the selling price in the first year, 1.5% in the second, and 2.5% in the third. Meticulous keeps track of warranty costs by year of manufacture and sale in order to eval uate the performance of company employees.
Answer the following, assuming Meticulous follows IFRS and has a December 31 fiscal year end.
(a) Assuming straight-line depreciation and no residual value for the tanks at the end of their 10-year useful life, what is the balance in the asset Storage Tanks account, net of accumulated depreciation, at December 31, 2011?
(b) What is the balance of the asset retirement obligation liability at December 31, 2013, assuming there has been no change to the estimate of the final cost of disposal?
(c) Assume that Meticulous incurred actual warranty expenditures of $1,500 in 2011 and $3,720 in 2012. Determine the balance of the Estimated Liability under Warranties on 2011 sales that would be reported on the December 31, 2012 balance sheet. Ignore HST and assume that Meticulous uses the expense approach to account for warranties.
(d) Determine the Warranty Expense relating to 2011 sales that would be reported on Meticulous's 2011 income statement.
(e) Meticulous follows a policy of filing its HST return on December 31 each year and either sending a cheque or requesting a refund on this date. Assuming there are no other HST transactions during the year, will Meticulous be sending a cheque or requesting a refund on December 31, 2011? What will be the amount of the cheque paid or refund claimed?

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