In: Accounting
Empire Building Co. makes toxic material used in chemical weapons. On December 31, 2008 they buy a factory for $5 million(cash) for the production of Policus, a dangerous chemical. The plant is expected to be used for 10 years, at which time it will be dismantled and the site will be cleaned up. Empire estimates that it will cost them $10 million at the end of 2018 to remove the factory and clean the area. The risk free rate on December 31, 2018 is 4% and the adjusted risk rate for the company is 8%.
a) Record the journal entry(ies) for the purchase of the factory.
b) Record the required adjusting entry(ies) at the end of 2009.
c) On December 31, 2018 the factory is removed at a cost of 7$ million and site is cleaned up at for an additional $4 million . Record the required journal entry(ies) for the factory clean up.