57. Assume U.S. GAAP (generally accepted accounting principles) applies unless
otherwise noted.
A company acquires a manufacturing facility in which it will produce toxic
chemicals. The cost of the facility (exclusive of the underlying land) is $25
million and it is expected to provide a 10-year useful life, after which time the
company will demolish the building and restore the underlying land. The cost of
this restoration and cleanup is estimated to be $3 million at that time. The facility
will be amortized on a straight-line basis. The company’s discount rate associated
with this obligation is 6.25 percent. The total expense that will be recorded in the
first year associated with the asset retirement obligation on this property is closest
to:
A. $163,618.
B. $224,945.
C. $265,879.
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