CC Recyclo Inc (CCRI) is a recycling manufacturer that melts down used plastic and repurposes them into new materials. CCRI has a factory (and land) located just outside of London, Ontario. On 5 January 20X1, new environmental legislation was passed requiring CC Recyclo Inc (CCRI) to perform environmental remediation to the land where they operate their recycling facility. The remediation will ensure that the land does not contaminate the water supply, wildlife, and other nearby farming activities. After a detailed review of the legislation, CCRI determined that the best course of action will be to dismantle part of their current factory and rebuild on another section of the property. The remediation is currently planned to begin in early 20X16. CCRI estimates that the total remediation will be $37.5 million. Assume that CCRI has determined that the pre-tax rate specific to the liability is 7.5%. CCRI has a June year-end.

Required:

1. Prepare the journal entries for CCRI for 20X1 and 20X2. Assume that CCRI uses straight-line depreciation.

2. Prepare a continuity schedule showing the carrying amount of the decommissioning obligation for CCRI.