QUESTION 1

On 1 January 2015 Blue Ltd. entered into an agreement with the municipality in terms of which Blue Ltd. is allowed to deposit manufacturing waste on a municipal dumping ground on the condition that Blue Ltd. rehabilitates the terrain to its original condition after 3 years. The rehabilitation costs are estimated at R798 600. Assume the present value of this amount is R600 000 on 1 January 2015.

Interest growth for year 1: R60 000

Interest growth for year 2: R66 000

Interest growth for year 3: R72 600

REQUIRED

Show the necessary journal entries with regards to the provision for rehabilitation costs for the years ended 31 December 2015 to 2017.