P$8-39.$ PPE capitalization, site restoration costs, depreciation, and changes in estimates $($L$.$O$.8-1,$ L$.$O$.8-2)($Medium $20$ minutes$)$

A provincially$-$owned utility company is constructing a large hydroelectric dam. This dam is expected to operate for $100$ years. During the construction period of $10$ years, the company incurs the following costs:

Compensation to Indigenous Peoples who have land claims in the affected area $$300,000,000$

Compensation to relocate non$-$Indigenous residents $200,000,000$

Site preparation $($e$.$g$.,$ clearing trees from land$)100,000,000$

Materials for dam $($e$.$g$.,$ concrete, steel$)2,000,000,000$

Construction labour on dam $1,700,000,000$

Power transmission lines $200,000,000$

Power generation equipment $500,000,000$

$$Total $$5,000,000,000$

The useful lives of the transmission lines and power generation equipment are expected to be well under $100$ years.

To fund the costs of the dam, the company issues $$5$ billion of bonds at the beginning of the construction period. These bonds bear interest at $6\%$ paid annually, were issued at par, and mature in $30$ years. The company reports using IFRS.

Required:

a$)$ Determine the amounts that the company should capitalize into the following categories: land, facilities $($dam$).$

b$)$ The company believes that the straight$-$line method is appropriate for the dam and transmission lines to match revenues. The facilities are expected to last for the full $100$ years and the transmission lines for $40$ years. The power generation equipment should be depreciated on a declining$-$balance basis at a rate of $10\%$ because their efficiency declines over time. Compute the amount of depreciation on the assets relating to this dam for the tenth year of operations. Assume that a full year of depreciation had been recorded in the first year of operations.

c$)$ After $10$ years of operations, the company revises the estimated useful life of the transmission lines from $40$ to $30$ years in total. How much would be the depreciation on the transmission lines in year $11?$

d$)$ During the environmental review process, regulators determined that the utility will need to restore the dam site to its original condition at the end of the dam$$s useful life. The estimated cost will be $$2,000,000,000.$ Prepare the journal entry to record these site restoration costs. The discount rate is $6\%.$

e$)$ For the first year of operations, record any entries related to the site restoration costs.