Question

Wildhorse company purchases an oil tanker depot on January 1, 2025, at a cost of 565,300. Wildhorse expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. The company estimates the dismantle and removal will cost71,990 at the end of the depot's useful life. What is the total cost of purchasing, operating, dismantling, and removing the depot?

1) $565,300
2) $637,290
3) $637,990
4) $637,990

Answer 1

The total cost of purchasing, operating, dismantling, and removing the depot is 2) $637,290.

Step-by-step explanation:

The total cost of purchasing, operating, dismantling, and removing the depot can be calculated by summing up the initial purchase cost, the operating costs over the useful life, and the dismantle and removal cost at the end. The initial purchase cost is $565,300.

Assuming no other costs are involved during the operating period, the operating costs are zero. At the end of the depot's useful life, the dismantle and removal cost is $71,990. Therefore, the total cost is $565,300 + $0 + $71,990 = $637,290.