Calculate the value of the decommissioning provision

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Question - You are the assistant controller for Venture Ltd. and are preparing the financial statements for the year ended December 31, 20X4. Venture prepares its statements in accordance with IFRS. The controller has asked to meet with you to discuss the accounting impact of a recent government inspection on the machinery and equipment used to manufacture one of Venture's product lines.

The equipment was installed in January 20X4 and shortly after was inspected by the government. Venture received an order that requires it to perform certain decommissioning activities when the machinery and equipment are dismantled at December 31, 20X9.

The decommissioning will be done by local professionals, and it is estimated that the cost in 20X9 will be $68,000. Venture's current pre-tax cost of borrowing is 6% for this line.

Required -

1. Calculate the value of the decommissioning provision, and prepare the journal entries required for January 20X4.

2. Provide the journal entries at December 31, 20X4.

Reference no: EM133017881

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