During the year ending 31 December 2019, Hydro Ltd constructed an electricity plant. The cost of the plant and associated technology amounted to $5 million.

Other costs associated with the construction amounted to

	$
Cost of building an access road to the site	2,500,000
Engineers’ fees	1,000,000
Government license to produce electricity	500,000
Opening ceremony	100,000
Total	4,100,000

At the end of the plant’s 10-year useful life, the government requires the company to dismantle the plant, remove it and return the site to its original condition. After consulting its own engineers and environmentalists, the company estimates these costs to be

	$
Dismantling the plant	650,000
Environmental remediation costs	1,250,000
Replacement of flora and fauna	100,000
Total	2,000,000

Hydro Ltd uses a discount rate of 12 % (Use this to calculate the present value of restoration costs).

Calculate the cost of the plant on 31 December 2019

Answer rating: 100% (QA)

Future Restoration cost include cost of dismantling cost of Environm... View the full answer