Scenario: River Spray Company was organized to grow cranberries. They

entered into an agreement with a landowner to lease $125$ acres to develop a

cranberry bog. The agreement states that River Spray will be obligated to

transform the land back to its original condition at the end of the $5-$year

agreement. Prior to receiving the permit, River Spray submitted a legally

binding plan that included a timetable for the full reclamation process. After

the end of $5$ years, River Spray will restore the land to its original condition.

River Spray has made the following estimates:

Labor costs to drain the bog are presently $$22$ hour but could increase

anywhere between $7$ and $14\%.$

The labor hours associated with draining the bog are approximately $10$ to

$15$ hours per acre.

Labor costs to backfill the soil removed are estimated at $25$ to $30$ hours

per acre.

The acreage will have to be reseeded, which will cost approximately

$$800$ an acre.

Native tree seedlings will have to be planted at a cost of $$20,000$ and

labor of $$1,500$ per acre.

An additional $$200,000$ to $$300,000$ is estimated for damages caused by

air and water pollution.

Wildlife will also have to be restored at a cost of $$150,000.$

Overhead costs should be approximately $70\%$ of total labor.

The risk$-$free rate is presently $2\%.$

Inflation is estimated to be approximately $2\%.$

Read the River Spray Company $($RSC$)$ scenario. Using the PDF Financial

Reporting Developments: Asset Retirement Obligations $($pages A$1-$A$6)$ as a

source, in three pages,

State the amount RSC should recognize related to this asset retirement

obligation.

Include an Excel schedule and calculations as presented in the Asset

Retirement Obligations article.