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E Ltd, a public limited company, operates in the energy sector. The company has developed significantly over the last few years and currently prepared its
E Ltd, a public limited company, operates in the energy sector. The company has developed significantly over the last few years and currently prepared its financial statements for the year ended 31 December 2022. It has recently constructed an ecologically efficient power station. A condition of granted the operating license by the government is that the power station to be dismantled at the end of its life that is estimated to be 30 years. The power station cost $150 million and commenced production on 1 January 2022. Depreciation is charged on the power station using the straight-line method. At 31 December 2022, E Ltd has estimated that it will cost $23 million to restore the site to its original condition using a discount rate of 6% (Note that this is not an annual rate). Besides, 92% of these costs relate to the removal of the power station and 8% related to the damage caused through generating energy. Required Discuss the accounting treatments of above transaction (7 marks) and prepare the extract of financial statements for the year ended 31 December 2022. (13 marks) Workings are required for the relevant calculations. (Total: 20 marks)
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