[Answer] A company buys an oil rig for $1 000 000 on January 1 2010. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $200 000 (present value at 10% is $77 110). 10% is an appropriate interest rate for this company. What expense should be recorded for 2010 as a result of these events?a. Depreciation expense of $120 000b. Depreciation expense of $100 000 and interest expense of $7 711c. Depreciation expense of $100 000 and interest expense of $20 000d. Depreciation expense of $107 710 and interest expense of $7 711

Answer: d
A company buys an oil rig for $1 000 000 on January 1 2010. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $200 000 (present value at 10% is $77 110). 10% is an appropriate interest rate for this company. What expense should be …

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