Question
DigiCom purchased a nuclear facility on January 5, 2015 for $5 million. It will use the nuclear facility for 7 years at which time it
DigiCom purchased a nuclear facility on January 5, 2015 for $5 million. It will use the nuclear facility for 7 years at which time it will be dismantled. The cost of decommissioning the nuclear facility after 7 years is $0.50 million. The effective rate of interest for DigiCom is 6% and all purchases were made for cash. DigiCom's fiscal year end is December 31, 2015. Record the following entries:
a) The purchase of the nuclear facility.
b) The recognition of the asset retirement obligation
c) the adjusting entries required at year-end regarding the nuclear facility assuming DigiCom uses the straight-line method for its long-term assets.
d) The entry on January 6, 2022 to dismantle the nuclear facility assuming it cost DigiCom $995,000.
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