Exercise 13-14 Sheffield Company purchases an oil tanker depot on January 1, 2017, at a cost of $575,800. Sheffield 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 $77,390 to dismantle the depot and remove the tanks at the end of the depots useful life.

Prepare the journal entries to record the depot (considered a plant asset) and the asset retirement obligation for the depot on January 1, 2017. Based on an effective-interest rate of 5%, the present value of the asset retirement obligation on January 1, 2017, is $47,510. (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.) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2017. Sheffield uses straight-line depreciation; the estimated salvage value for the depot is zero. (Round answers to 0 decimal places, e.g. 5,275. 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.) On December 31, 2026, Sheffield pays a demolition firm to dismantle the depot and remove the tanks at a price of $87,680. Prepare the journal entry for the settlement of the asset retirement obligation. (Round answers to 0 decimal places, e.g. 5,275. 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.)