Reference no: EM132962833

During the reporting period ending 30 June 2022, Midnight Boil Ltd constructed a nuclear power generator just outside of Melbourne. The cost of the power generator and associated technology amounted to $12 550 000.

Other costs associated with the construction amounted to:

Costs incurred in obtaining access to the site $2 500 500
Power permits $400 500
Engineers' fees $1 100 500
Total $4 001 500

The plant was ready to start generating power on 1 July 2022, with actual generation starting on 1 October 2022. At the end of the power plant's useful life, which is expected to be 10 years, Midnight Boil Ltd is required by the government to dismantle the plant, remove it, and return the site to its original condition.

After consulting its own engineers and environmentalists, Midnight Boil Ltd estimates these costs to be:

Dismantling the plant                                   $750 500
Environmental remediation costs                $1 249 500
Replacement of flora and fauna                  $100 000
Total                                                        $ 2 100 000

Midnight Boil Ltd uses a discount rate of 10 per cent.

REQUIRED

Problem 1: Prepare the journal entries necessary to account for the power plant for the years ended 30 June 2022, 30 June 2023 and 30 June 2024. Ignore depreciation.