Champion Incorporated is a Canadian company that manufactures steel. On January 2, 2020, Champion purchased a building for $25,000,000 that it will use for manufacturing its products. The building has a useful life of 20 years with no estimated residual value. To comply with regulatory code, the government requires Champion to clean up the property on which the building is located at the end of the building’s useful life. Champion estimates that the clean up will cost $2,200,000. Assume that the clean up costs relate entirely to the purchase of the building, not to operations over the next 20 years.

The company’s discount rate is 5%. Champion adheres to IFRS and has a December 31 year end. Champion uses the straight-line method to depreciate all its buildings.

Required:

Prepare journal entries to record each of the following:

1. The cost of the building on January 2, 2020.
2. The asset retirement obligation on January 2, 2020.
3. Any year end adjustments required for the building and the asset retirement obligation on December 31, 2020.