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.