Blossom's Drillers erects and places into service an off-shore oil platform on January 1, 2025, at a cost of $8,160,000. Blossomestimates it will cost $1,007,000 to dismantle and remove the platform at the end of its useful life in 10 years, which the company islegally required to do. (The fair value at January 1, 2025, of the dismantle and removal costs is $430,000.) Prepare the entry to recordthe asset retirement obligation. (Credit account titles are automatically indented when amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List debit entry beforecredit entry.)Account Titles and ExplanationDebitCredit

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Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 6RE

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Bassinger Company purchases an oil tanker depot on January 1, 2022, at a cost of $600,000. Bassinger 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. It is estimated that it will cost $70,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life. a Prepare the journal entries to record the environmental liability for the depot on January 1, 2022. Based on an effective-interest rate of 6%, the fair value of the environmental liability on January 1, 2022, is $39,087. b Prepare any journal entries required for the environmental liability at December 31, 2022 and 2023. c On December 31, 2031, Bassinger pays a demolition firm to dismantle the depot and remove the tanks at a price of $65,000. Prepare the journal entry for the settlement of the environmental liability.
Crane Company purchases an oil tanker depot on January 1, 2020, at a cost of $639,700. Crane 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. It is estimated that it will cost $69,980 to dismantle the depot and remove the tanks at the end of the depot's useful life. (a) Your answer is partially correct. Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) the asset retirement obligation on January 1, 2020, is $39,076. (If no entry is Date Account Titles and Explanation Debit Credit January 1, depot 2020 639700 Cash 639700 (To record the depot) January 1, 2020 depot 39076 Asset Retirement…
Calaf’s Drillers erects and places into service an off-shore oil platform on January 1, 2021, at a cost of $10,000,000. Calaf is legally required to dismantle and remove the platform at the end of its useful life in 10 years. Calaf estimates it will cost $1,000,000 to dismantle and remove the platform at the end of its useful life in 10 years. (The fair value at January 1, 2021, of the dismantle and removal costs is $450,000.) Prepare the entry to record the asset retirement obligation.
Swifty Limited purchased an oil tanker depot on July 2, 2023, at a cost of $516,000 and expects to operate the depot for 10 years. After the 10 years, Swifty is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $64,500 to do this at the end of the depot's useful life. Swifty follows ASPE. Show how all relevant amounts will be reported on Swifty's financial statements at December 31, 2023. (Round answers to O decimal places, e.g. 5,250.) I Current Assets SWIFTY LIMITED Balance Sheet (Partial) As at December 31, 2023 SWIFTY LIMITED Income Statement (Partial) For the Year Ended December 31, 2023 $ 14 A
The Fairy Company purchased a site for limestone quarry for P 100,000 on January 2,2020. It estimates that the quarry will yield 400,000 tons of limestone. It estimates that itsretirement obligation has a fair value of P 20,000 after which the land can be sold for P10,000. In 2020, 80,000 tons were quarried and 60,000 tons sold. Cost of production(excluding depletion) are P4 per ton. Required:a. Compute the depletion cost per ton.b. Compute the total cost of inventory at December 31, 2020.c. Compute the total cost of goods sold for 2020.
Al Hamd drillers erects and places into service an off-shore oil platform on January1, 2018, at a Cost of $ 15000000. Al Hamd is legally required to dismantle and remove the platform at the end of its usefull life in 10 years. The company estimates it will cost $ 1500000 to dismantle and remove the platform at the end of its useful life in 10 years (the fair value at January 1 2018 of the dismantle and removing cost is $ 650000). Prepare the entry to record the environmental liability.
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On January 1, 2019, Yolanda Company purchased a plating machine for P5,400,000. Yolanda received a government grant of P400,000 toward this capital cost. The machine is to be depreciated using straight line method with a five year life and no salvage value. The accounting policy is to treat the government grant as a reduction in the cost of the asset. What is the carrying amount of the machine on December 31, 2020?
On January 1, 2019, Yolanda Company purchased a plating machine for P5,400,000. Yolanda received a government grant of P400,000 toward this capital cost. The machine is to be depreciated using straight line method with a five year life and no salvage value. The accounting policy is to treat the government grant as a reduction in the cost of the asset. What is the carrying amount of the mạchine on December 31, 2020?
On March 31, 2024, a company purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $232,200, with estimated salable rock of 27,000 tons. During 2024, The company loaded and sold 5,000 tons of rock and estimated that 22,000 tons remained on December 31, 2024. On January 1, 2025, the company estimated that 10,000 tons still remained. During 2025, the company loaded and sold 15,000 tons. The company uses the units-of-production method. The company would record depletion in 2024 in the amount of: Note: Do not round depletion rate per ton. Multiple Choice $43,340. $52,773. $32,250. $43,000.
Oriole Company purchases an oil tanker depot on January 1, 2025, at a cost of $657,400. Oriole 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 cost $73,610 at the end of the depot's useful life. (a) Prepare the journal entries to record the depot and asset retirement obligation for the depot on January 1, 2025. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2025, is $41,103. Use the Plant Assets account for the tanker depot. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) (b) Account Titles and Explanation (To record the depot) (To record the asset retirement obligation) eTextbook and…
DMH Industries Limited purchased a strip mine for cash on April 1, 2023 at a cost of $5,787,000. DMH expects to operate the mine for 10 years, at which it is legally required to restore the surrounding area to its original state. It is estimated that it will cost $477,000 to do this at the end of the mine's useful life. The company's year-end is December 31, and DMH follows ASPE. (a) Your Answer Correct Answer Your answer is correct. Prepare the journal entry to record the purchase of the mine and to record the asset retirement obligation for the mine on April 1, 2023. Based on the effective interest rate of 5%, the present value of the asset retirement obligation (i.e., its fair value) on the date of acquisition is $292,837. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) (b) Date Account…

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