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KengaRu [80]
3 years ago
6

A company completes construction of a $400 million offshore oil platform and places it into service on January 1. State law requ

ires that the platform be dismantled and removed at the end of its useful life, which is estimated to be 10 years. The company estimates that the cost of dismantling the platform will be $20 million. The discounted value of the liability is $9 million using the company's credit-adjusted, risk-free rate. The company has already capitalized the $400 million construction cost of the platform. What amounts should the company record as liability and expense when the asset is placed into service
Business
1 answer:
Sauron [17]3 years ago
3 0

Answer:

b. Liability, $9,000,000; expense, $0.

Explanation:

An asset retirement obligation (ARO) refers to an obligation with respect to the acquisition , construction, development, etc. The liability should be recognized the liability at the present value that should be expected to be paid for settling the obligations

Here the $9,000,000 million represents the liability

Also the journal entry is

Asset Dr

        To liability

(Being the asset placed is recorded)

There is no expense should be recorded in the income statement

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Some problems that Hudson will face when they enter into the European market include:

  • Competition from established industries.
  • Higher cost of establishment.
  • Lower profits or losses in first few years.

<h3>Why will Hudson face these problems?</h3>

Hudson would be going up against already established companies who have a loyal customer base and less costs as they do not need to pay for startup costs.

Hudson will also incur high investment costs in the areas of production and advertisement as they try to establish themselves in the European markets.

As a result of these high costs, Hudson will make losses or low profits as they might not be able to draw enough clientele to cover the cost of setting up in Europe.

In conclusion, Hudson faces several challenges.

Find out more about start up costs at brainly.com/question/13923720.

3 0
2 years ago
4. An investment offers $10,000 per year for 20 years. If an investor can earn 6 percent annually on other investments, what is
telo118 [61]

Answer:

PV= $114,699.21

Explanation:

Giving the following information:

Annual payment= $10,000

Number of years= 20

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<u>To calculate the present value, we need to use the following formula:</u>

PV= A*{(1/i) - 1/[i*(1 + i)^n]}

A= annual payment

PV= 10,000*{(1/0.06) - 1 / [0.06*(1.06^20)]}

PV= $114,699.21

8 0
3 years ago
You purchased a stock at a price of $46.55. The stock paid a dividend of $1.79 per share and the stock price at the end of the y
Mama L [17]

Answer:

3.84%

Explanation:

Calculation for dividend yield

Using this formula

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Where,

D=$1.79

P0=$46.55

Let plug in the formula

Dividend Yield(%) =$1.79/$46.55

Dividend Yield(%) =0.0384*100

Dividend Yield(%) =3.84%

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You consider buying a share of stock at a price of $31. the stock is expected to pay a dividend of $2.58 next year, and your adv
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Some policymakers have argued that products like​ cigarettes, alcohol, and sweetened soda generate negative externalities in con
White raven [17]

Answer: The correct answers are "decrease" and "decrease".

Explanation: Some policymakers have argued that products like​ cigarettes, alcohol, and sweetened soda generate negative externalities in consumption. All else​ equal, if the government decided to impose a tax on​ soda, the equilibrium quantity of soda would​ <u>decrease</u> and the equilibrium price of soda would​ <u>decrease.</u>

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