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A company starts using an oil rig at a cost as follows:                                                  $million Construction                               200 Installation                                  100 The oil starts pumping at the start of the year. At this point, the company signs a license with the government agreeing to dismantle the rig when the oil runs out which is estimated to be 20years. the cost of dismantling the rig is estimated at $120million and the discount rate is 10%. What will be the effect on the Financial Statements in the current year. Show the amount that will be in the financial statement

A company starts using an oil rig at a cost as follows:                                                  $million Construction                               200 Installation                                  100 The oil starts pumping at the start of the year. At this point, the company signs a license with the government agreeing to dismantle the rig when the oil runs out which is estimated to be 20years. the cost of dismantling the rig is estimated at $120million and the discount rate is 10%. What will be the effect on the Financial Statements in the current year. Show the amount that will be in the financial statement

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company starts using an oil rig at a cost as follows:

                                                 $million

Construction                               200

Installation                                  100

The oil starts pumping at the start of the year. At this point, the company signs a license with the government agreeing to dismantle the rig when the oil runs out which is estimated to be 20years. the cost of dismantling the rig is estimated at $120million and the discount rate is 10%.

What will be the effect on the Financial Statements in the current year. Show the amount that will be in the financial statement

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