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In five years’ time Rainbird will have to dismantle its factory and return the site to the local authority. A provision was set up for the present value of the dismantling costs when the factory was first acquired. The opening balance on the provision at 1 January 20X1 was $2.63 million. Rainbird has a cost of capital of 8%.
What is the amount of the provision that should be carried forward at 31 December 20X1 for the dismantling of the factory?A $2,630,000
B $2,419,600
C $2,435,185
D $2,840,400The answer is £2,840,400
£2,630,000 * 1.08
The costs in 5 years must be 3.86
2.84 * 1.08 = 3.07
3.07 * 1.08 = 3.32
3.32 * 1.08 = 3.59
3.59 * 1.08 = 3.87 (rounding differences)@mightyminnie said:
The answer is £2,840,400£2,630,000 * 1.08
The costs in 5 years must be 3.86
2.84 * 1.08 = 3.07
3.07 * 1.08 = 3.32
3.32 * 1.08 = 3.59
3.59 * 1.08 = 3.87 (rounding differences)Thanks all clear 🙂
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