ProWasher’s lawyer, Anna Turney, informed you that ProWasher has a legal obligation to dismantle and remove the equipment used to produce the dishwashers and clean up the rental premises as part of the lease agreement. The equipment, costing $10 million, was put into production on June 1, 2023 and has a useful life of 120 months. The dismantling and removal costs are estimated to be $3 million. What is the accountant supposed to do?
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- ProWasher’s lawyer, Anna Turney, informed you that ProWasher has a legal obligation to dismantle and remove the equipment used to produce the dishwashers and clean up the rental premises as part of the lease agreement. The equipment, costing $10 million, was put into production on June 1, 2023 and has a useful life of 120 months. The dismantling and removal costs are estimated to be $3 million.
What is the accountant supposed to do?
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- Your client, Portsmouth Mining, recently entered into an agreement to obtain the rights to operate a coal mine in Virginia for $15 million. Portsmouth incurred development costs of $6 million in preparing the mine for extraction, which began on Jul 1, 2021. The contract requires Portsmouth to restore the land and surrounding area to its original condition after extraction is complete in three years. The company controller, Anna Dickson, is not sure how to account for the restoration costs and has asked your advice. Anna is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20% $ 4 million 30% $ 5 million 25%…Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue.…Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue.…
- Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue.…Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2021. The contract requires Hazelton to restore the land and surrounding area to its original condition after extraction is complete in three years.The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue, but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities. Cash Outflow Probability $ 3 million 20 % 4 million 30 % 5 million 25 % 6 million 25 % Alice also informs you that the company’s credit-adjusted risk-free interest rate is 9%. Before responding to Alice, you need to research the issue. Research…In janaruary, Prahbu purchased a new machine for use in the existing production line of his manufacturing business for $90,000. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete and prahbu places the machine in service on the production line. On December 3, prahbu pays another $3,300 to perform periodic qaulity testing after the machine is placed in service. . How much will prahbu be required to capitalize as the cost of the machine.?
- In January, Prahbu purchased for $100,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $4,075 to install the machine, and after the machine is installed, he pays $2,350 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $5,400 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine?In January, Prahbu purchased for $93,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $ 3,550 to install the machine, and after the machine is installed, he pays $2,000 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $4,700 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the costCraig has decided to start snow plowing during the winter months. He purchased a heavy-duty dump truck with plow and salter from Power Equipment for $40,000 on October 1st, 2026. He paid $1,000 as a down payment and the remaining balance on a 5% -7 year note to Power Equipment. You will be completing several accounting activities in regards to this purchase. 1. Prepare the Deprecation schedule in Excel for this dump truck with plow. Use the suggested life from an IRS publication 946, Chapter 4, Under Property Classes. Craig believes the salvage (residual) value will be $10,000 after its useful life. Craig will use the straight-line depreciation method for accounting purposes. Hint: In the first year and last year you will have partial depreciation. Include a column for Accumulated Depreciation and Book Value. Be sure your table is professional and fits on one page.
- Murphy Mining Company recently purchased a quartz mine that it intends to work for the next 10 years. According to state environmental laws, Murphy must restore the mine site to its original natural prairie state after it ceases mining operations at the site. To properly account for the mine, Murphy must estimate the fair value of this asset retirement obligation. This amount will be recorded as a liability and added to the value of the mine on Murphy’s books. (You will learn more about these asset retirement obligations in Chapters 10 and 13.) There is no active market for retirement obligations such as these, but Murphy has developed the following cash flow estimates based on its prior experience in mining-site restoration. It will take 3 years to restore the mine site when mining operations cease in 10 years. Each estimated cash outflow reflects an annual payment at the end of each year of the 3-year restoration period. Restoration EstimatedCash Outflow ProbabilityAssessment…Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1, 2016. The contract requires Hazelton to restore the land and surrounding area to their original condition after extraction is complete in three years. The company controller, Alice Cushing, is not sure how to account for the restoration costs and has asked your advice. Alice is aware of an accounting standard addressing this issue but is not sure of its provisions. She has narrowed down the possible cash outflows for the restoration costs to four possibilities: Cash Outflow Probability $3 million 20% 4 million 30% 5 million 25% 6 million 25% Alice also…in the new building? 40. In January, Prahbu purchased for $90,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $3,300 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine? Donn 11 LO 2-1 resear
