Areva Resources Namibia Plc. undertook a project involving the construction of aseawater desalination plant at Wlotzkasbaken near Swakopmund. The project wascompleted on 01 January 2017 at a cost of...

Areva Resources Namibia Plc. undertook a project involving the construction of aseawater desalination plant at Wlotzkasbaken near Swakopmund. The project wascompleted on 01 January 2017 at a cost of N$10 000 000. The directors of ArevaResources believe their multi-million dollar project shall be able to supply all thewater to be consumed at Trikkopje mine, some 40km into the dessert. After 5 years,the company has an obligation to dismantle and restore the environment incompliance with both the Ministry of Marine Resources & Fisheries and the Ministryof Environment & Tourism regulations.Management of Areva Resources has established that the cost of dismantling andrestoration of the environment was N$4 000 000 on 1 January 2017. The year-on-year inflation rate was 6% on 1 January 2017 and is unlikely to change. The companyspecific pre-tax risk adjusted discount rate is 10%.Required:Prepare the relevant journal entries from 1 January 2017 to 31 December 2018arising from the transactions above. Assume that on 31 December 2019 there wasan advance in technology which would save the final cost of the dismantling andrestoration cost by N$500 000.(30 marks)