At the beginning of current year, Cambridge Company purchased a gas detoxification facility for P5,000,000.

The cost of cleaning up the routine contamination caused by the initial location of gas on the property is estimated to be P1,000,000 .

This cost will be incurred in 10 years when all of the existing stockpile of gas is detoxified and the facility is decommissioned.

The appropriate discount rate is 6%. The present value of 1 at 6% is 0.56 for 10 periods.

1. What is the decommissioning liability on January 1? a. 560,000 b. 500,000 c. 400,000 d. 280,000

2. What is the interest expense for current year? a. 60,000 b. 30,000 c. 24,000 d. 33,600

3. What is the total cost of the detoxification facility? a. 5,000,000 b. 6,000,000 c. 5,560,000 d. 5,500,000

4. What is the depreciation for current year? a. 556,000 b. 500,000 c. 550,000 d. 500,000