Question

On January 2, 20X7, HDL Ltd. (uses ASPE) purchases a transmission tower for $1,200,000, which it installs on the roof of its leased premises. This is recorded as an asset. HDL is required by the terms of the building lease to remove the tower at the end of six years, at an estimated cost of $50,000. The transmission tower can be reinstalled elsewhere after it is removed from these premises and has an economic life of 12 years. Assume the relevant interest rate is 6% per annum. HDL uses straight line depreciation. Required: Record all necessary entries for HDL related to this transaction for its year ended December 31, 20X7. For this part only, assuming that the interest rate was revised to 5% at the end of 20X7 and that the cost of removal is expected to remain the same, record any journal entries which differ from what was recorded in part 1).