DEF Corporation built a factory that produces widgets at a cost of $100 million. The factory began its operation on January 1, 2022. The factory has a licensed to be in operations for 30 years and after that, the factory must be demolished and disposed of. At January 1, 2022, the cost of demolishing the factory was estimated to be $20 million. An appropriate discount rate is 5%, when the present value of $1 is $0.2314 in 30 years’ time.
Requirement
a.) What is the value of the provision in the statement of financial position at December 31, 2022
b.) What is the carrying amount of the factory at December 31, 2022?