Accounting - open to bidding

Case study 1: Inspection and overhaul costs, decommissioning Company A built a new plant and it was brought into use on January 1, 20X0. After 5 years, part of the plant will be inspected by environmental regulators and remedial work may be required. Company A applies component accounting and has treated the plant as having two parts – the inspection/overhaul and the remaining plant. The company intends to use the estimate of the inspection/overhaul costs as an indicator of the cost of the parts of the item. Question 1 What journal entries are required at December 31, 20X0? Ignore taxation. The following information is relevant: Cost to construct plant 150,000 Estimated useful life of plant 20 years Estimated inspection / overhaul costs after 5 years 20,000 Question 2 Refer to Company A above. Environmental laws require Company A to dismantle the plant at the end of its useful life. The initial estimate of the removal costs is 75,000. a. What additional journal entry is required at initial recognition of the plant? Ignore taxation and discounting (if any). The installation and testing of A’s plant results in contamination of the ground at the plant. A will be required to clean up the contamination when the plant is dismantled. b. How should the cleaning of the contamination be accounted for?