Adjustments for changes in estimates. Central States Electric Company constructs a nuclear power plant at a cost of $200 million. It estimates the service life of the plant to be 50 years and the cost to dismantle and retire the asset from service to be $20 million. These “decommissioning” costs include the costs to dismantle the plant and dispose of the radioactive materials. The firm computes and charges straight line depreciation once per year, at year end. During the company’s 11th year of operating the plant, Congress enacts new regulations governing nuclear waste disposal. The estimated decommissioning costs increase from $20 million to $24 million. During the 31st year of operation, the firm revises the estimated service life of the plant to 60 years in total.
a. What is the depreciation charge for the first year?
b. What is the depreciation charge for the 11th year?
c. What is the depreciation charge for the 31st year?