1. Tormarten Environmental Inc. (TEI) has just completed the construction of a special hazardous waste disposal site outside Toronto. The site will accept waste such as cooked muck & sludge from dry cleaning facilities, as well as used oil from automotive facilities, and is expected to be operational for 20 years. The land was purchased for $850,000, and construction costs (including the installation of concrete lining and multiple groundwater sampling wells) amounted to $3.5 million. On September 1, 2022, the municipality inspected the newly completed construction site and issued a hazardous waste permit that allows TEI to operate the facility until August 31, 2042. The permit stipulates that TEI must properly cap the site and restore the surface immediately following the operating period so that it will be available and safe for alternate uses.TEI’s engineers have agreed on the following estimates of the cost of complying with the permit stipulations (site restoration costs), under the assumption that the costs will be incurred in 2022:
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3. • Materials (including clean fill and capping material): $235,000 
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5. • Labour: $145,000 
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7. • Other (equipment usage, hiring of specialized contractors, project management, water, and soil testing): $630,000 Inflation can be assumed at 3%/year. TEI’s discount rate is 8%. TEI is a private company that follows ASPE and has a December 31 year-end. 
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11. Task 1 (2022) You work at TEI and have been assigned to the new facility. Your first task is to prepare a report for the CFO providing him with some proforma information for the upcoming few years. 
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13. (a) Determine the cost (in 2042 dollars) TEI expects to incur in remediating the facility immediately after it closes in August 2042. 
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15. (b) Prepare the journal entry to record the obligation TEI faces as stipulated in the operating permit. 
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17. (c) Prepare the 2022 and 2023 year-end journal entries related to the hazardous waste disposal site.TEI’s depreciation policies require straight-line amortization over the useful life of its assets. The site is expected to have no residual or salvage value. 
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19. (d) Prepare a partial proforma balance sheet in good form for fiscal 2023, showing captions and related amounts for the site and the related obligation. 
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21. (e) Draft a note that could be included in TEI’s December 31, 2022, financial statements. Ensure you show all required disclosures.

Answer rating: 100% (QA)

Answer Task 1 2022 a The cost in 2042 dollars TEI expects to incur in remediating the facility immediately after it closes in August 2042 is 1084872 b The journal entry to record the obligation TEI fa... View the full answer