Raycroft operates a nuclear power station. The power station is due to be decommissioned on31 December 20X8 but will be fully operational up to that date. It has been estimated that thecost of decommissioning the power station and cleaning up any environmental damage, asrequired by legislation, will be $60 million. Raycroft recognised a provision for the presentvalue of this expenditure at 31 December 20X0. A suitable discount rate for evaluating costsof this nature is 12%, equivalent to a present value factor after eight years of 0.404. Thedecommissioning cost will be depreciated over eight years. What is the total charge to profitor loss in respect of this provision for the year ended 31 December 20X1 and 20X2?

The objective of the question is to calculate the total charge to profit or loss in respect of the…

Answered: Raycroft operates a nuclear power…

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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On April 30, 2020, Ayayai Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2020. Overall, the cost of the ship was $93 million, with an estimated useful life of 12 years and residual value of $30 million. Ayayai expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits: Part Cost Useful life Residual value Pattern ofbenefits Total output(nautical miles) Engines (6) $925,000 per engine 8 years $100,000 per engine Varies with activity 6 million Hull $3,350,000 10 years $500,000 Highest in early years 7.50 million Body $84.10 million 15 years $14.98 million Evenly over life of body 12.00 million…
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