At the beginning of the current year, Spicy and Saucy Co. (S&S) built a hot sauce factory in the middle of British Columbia’s semi-arid region for a cost of $2,000,000. Note the following: British Columbian regulators have provided S&S with a 20-year production licence. As a requirement of the licence, at the end of the licensing period, S&S must close the factory and return the land to its original state. The factory will have no residual value at the end of the production licence. Engineering reports commissioned by S&S show that the best estimate of costs to settle the obligation in 20 years will equal $100,000. Any amount greater than $2,000 is material to S&S The company’s risk-free discount. S&S reports under ASPE.

At the end of 20 years, what is the balance in the factory asset and the ARO accounts of S&S, assuming no changes in the estimate of expected future cash flows?

Answer rating: 100% (QA)

SOLUTION At the end of 20 years assuming no changes in the estimate of expected future cash flows th... View the full answer