Lifeline Biofuels built an oil rig at a cost of $4.5 million. The company estimates the oil rig will have a useful life of 20 years (with no salvage value), after which Federal regulations require that the oil rig must be dismantled and the land area restored. The fair value of the costs of this asset retirement project is $850,000. The present value of these asset retirement costs is $265,000 based on the 6% after-tax discount rate. Under U.S. GAAP, what is the initial capitalized carrying value of the oil rig at the completion of construction? Group of answer choices $270,000 $4,235,000 $4,765,000 $4,500,000
Lifeline Biofuels built an oil rig at a cost of $4.5 million. The company estimates the oil rig will have a useful life of 20 years (with no salvage value), after which Federal regulations require that the oil rig must be dismantled and the land area restored. The fair value of the costs of this asset retirement project is $850,000. The present value of these asset retirement costs is $265,000 based on the 6% after-tax discount rate. Under U.S. GAAP, what is the initial capitalized carrying value of the oil rig at the completion of construction? Group of answer choices $270,000 $4,235,000 $4,765,000 $4,500,000
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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Lifeline Biofuels built an oil rig at a cost of $4.5 million. The company estimates the oil rig will have a useful life of 20 years (with no salvage value), after which Federal regulations require that the oil rig must be dismantled and the land area restored. The fair value of the costs of this asset retirement project is $850,000. The present value of these asset retirement costs is $265,000 based on the 6% after-tax discount rate. Under U.S. GAAP, what is the initial capitalized carrying value of the oil rig at the completion of construction?
Group of answer choices
$270,000
$4,235,000
$4,765,000
$4,500,000
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