On January 1 of the current year ListenUp

Telecommunication invested #3149

On January 1 of the current year, ListenUp Telecommunication invested idle cash of $
12,500,000 in transmission towers and $ 9,000,000 in poles and lines to improve service to its
customers. ListenUp is responsible for dismantling and removing the towers, poles, and lines at
the end of their useful lives under each city’s and town’s removal and restoration requirements.
The towers have a 10- year useful life and the poles and lines have a 15- year useful life.
ListenUp uses the straight- line method for depreciation with no residual value expected at the
end of the useful lives of the assets. ListenUp estimates the cost to dismantle and restore
property related to the towers of $ 950,000. Even though the poles and line method of
transmission has been used for many years, ListenUp is install-ing these in numerous cities and
towns. Recently, cities and towns have been increasing their standards for removal and
restoration. Therefore, the costs to remove and restore the poles and lines do not have a
reasonably determinable quoted market price and market comparables are not available. As a
result,ListenUp decided to use a probability- based estimate. The probability- based estimate
employs the expected cash flows needed for the costs of dismantling and removal in today’s
market. The estimated values are as follows:Estimated Future Cash Flows Probability of
Occurrence$ 50,500………………………………………………5%$ 350,000……………………………………
…………………………………………….40%$ 985,000 …………………………………………… 20%The co
capital is 5%.Requireda. Prepare the journal entries required to record the acquisition of each
asset. b. Prepare the journal entry to record the first and second year’s depreciation and
accretion accrual for each asset. c. What is the carrying value of each asset at the end of the
second year? What is the carrying value of the ARO at the end of the second year?View
Solution:
On January 1 of the current year ListenUp Telecommunication invested

ANSWER
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