1. Explain the differences between an asset retirement obligation and an environmental obligation.

2. When an an asset retirement obligation is recorded on the balance sheet, the following entry is recorded:

Debit: Asset retirement cost (ARC, a long-lived asset)

Credit: Asset retirement obligation (ARO, a long-term liability)

What are the corresponding expenses on the income statement recorded over time? 

Briefly describe how the matching principle is applied by explaining the nature of these expenses, and how they are recorded to the income statement.