Accounting · Provisions and Contingencies
On 1 January 20X4, Star Co completed the construction of a power plant that has an estimated useful life of 20 years. Star Co immediately started to use the power plant. Star Co is required, by law, to restore the site on which the plant is built at the end of its useful life. At 1 January 20X4 the estimated cost of dismantling the plant and restoring the site after 20 years was $5 million. The cost of capital of Star Co is estimated at 8.5%. The present value of $1 after 20 years is 0.196. What interest expense should Star Co recognise for the year ended 31 December 20X5 in relation to the power plant?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1$425,000
- 2$83,300
- 3$90,381✓
- 4$49,000
Correct answer
$90,381
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