Aircraft Recycling Inc. (ARI) was granted a 10 year zero cost lease of land by the provincial government in Murdochville, QC, on which to build a recycling plant involved in aircraft part recovery from retired aircraft. Operations began on January 1, 2022. ARI has a December 31 year end, and uses ASPE. The cost of the plant was $10 million.

After 10 years, (ie: January 1, 2032) the government requires that ARI dismantle the plant and clean up any residual waste material to restore to the initial condition.

You are advised that 70% of the estimated future dismantle/clean-up cost was included in the ARO calculation at January 1, 2022 with the other 30% to be incurred over the 10 years of operation and to be recorded at each fiscal year end only.

The discount rate is 6%.

ARI encountered a major computer hack in 2022, and lost many files required in its financial accounting software- the former controller forgot to perform the backups normally done. It is currently undergoing the annual audit, and the new controller needs your assistance to respond to the auditors re its ARO.

The data recovered show the additional information on ARO:

Balance, ARO, January 1, 2022 - $?

Accretion (Interest) expense- ARO- 2022 - $93,810

Depreciation expense for plant and ARO for 2022 (using straight line) - ?

The new controller is anxious for you to answer the following questions based on this information.

What was the estimate of the future clean-up/dismantle costs in 10 years?

Answer rating: 100% (QA)

Based on the given information 70 of the estimated future dismantlecleanup cost was included in the ... View the full answer