Exercise 13-14 Wildhorse Company purchases an oil tanker depot on January 1, 201

Question

Exercise 13-14 Wildhorse Company purchases an oil tanker depot on January 1, 2017, at a cost of $609,000. 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. It is estimated that it will cost $80,770 to dismantle the depot and remove the tanks at the end of the depot's useful life. Prepare the journal entries to record the depot considered a plant asset and the asset retirement obligation or the depot on January ? 2D17 Based on an effective nterest rate of 79 he resent value of the asset retirement obligation on January 1, 2017, is $41,059. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit January 1, 2017 To record the depot) January 1, 2017 To record the asset retirement obligation) Prepare any journal entries required for the depot and the asset retirement obligation December 31, 2017. Wildhorse uses straight-line depreciation; the estimated salvage value for the depot is zero. (Round answers to O decimal places, e.g. 5,275. 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.) Date Account Titles and Explanation Debit Credit December 31, 2017

Explanation / Answer

SOLUTION

S.No. Date Account titles and Explanation Debit ($) Credit ($) 1. Jan.1, 2017 Depot 609,000 Cash 609,000 (To record the depot) Jan.1, 2017 Depot 41,059 Asset Retirement Obligation 41,059 (To record the asset retirement obligation) 2. Dec.31, 2017 Depreciation Expense ($609,000 /10 years) 60,900 Accumulated Depreciation 60,900 (To record depreciation for the depot) Dec.31, 2017 Depreciation Expense ($41,059 / 10 years) 4,106 Accumulated Depreciation 4,106 (To record depreciation on asset retirement obligation) Dec.31, 2017 Interest Expense ($41,059 *7%) 2,874 Asset Retirement Obligation 2,874 (To record interest on asset retirement obligation) 3. Dec. 31, 2026 Asset Retirement Obligation 80,770 Loss on Asset Retirement Obligation settlement 4,120 Cash 84,890

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.