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Calculate the liability using the low range

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Question - WDI hires outside environmental consultants to frequently test the sites for contaminants and estimate future retirement costs. Because there are many assumptions required to estimate these costs, the outside engineers' report usually provides a range of reasonable estimates. The most recent report was as follows:

Low end of the range: $5,000,000 on initial closure in year 20, and then $500,000 annually for 15 years.

High end of the range: $11,000,000 on initial closure in year 20, and then $350,000 for 25 years.

All costs should be discounted using a rate of 7%.

Historically, WDI has used the high end of the range to estimate the asset retirement obligation. Marlene would like WDI to now use the low end of the range to calculate the liability to be reported at December 31, 2020. The unaudited balance has been adjusted for accretion only.

How can recalculate the liability using the low range using the discounting approach?

Reference no: EM132998621

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