Economics: Discounting and Inflation
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Questions and Answers

What is the ARO provision and ARO asset recognized at the year ended 31 March 20X2?

€960,874

What are the entries recorded in the year ended 31 March 20X2 when the ARO provision is increased?

DR Interest expense 23,436, CR ARO provision 23,436

What is the ARO provision and ARO asset recognized at the year ended 31 March 20X3?

€1,149,045

What are the reasons for the increase in the provision of €188,171 in the year ended 31 March 20X3?

<p>Combination of passage of time and increase in estimated restoration costs</p> Signup and view all the answers

What are the accounting entries recorded in the year ended 31 March 20X3 for the increase in provision?

<p>DR Interest expense 24,022, DR ARO Asset 164,149, CR ARO provision 188,171</p> Signup and view all the answers

Why is a corresponding tangible fixed asset recorded upon recognition of a provision?

<p>To recognize the asset that will be restored in the future</p> Signup and view all the answers

What is the discount rate used to calculate the present value of the restoration cost?

<p>2.5%</p> Signup and view all the answers

How is the ARO period updated in March 20X3?

<p>From 9 years to 8 years</p> Signup and view all the answers

What is the impact on the provision when the estimated restoration cost increases by €200,000?

<p>The provision increases by €200,000</p> Signup and view all the answers

Why is interest expense recognized in the year ended 31 March 20X3?

<p>To recognize the effect of time on the provision</p> Signup and view all the answers

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