Harvey Ltd. acquired a gas station on Oct. 1, 2020, at a cost of $800,000 and expects to operate the facility for 5 years. After the 5 years, the company is required by provincial laws to demolish the gas station and decontaminate and dismantle the underground gas storage tanks. It is estimated that the job will cost $128,000 at that time. Harvey follows ASPE and has a December 31 year end.

(1) Harvey has an effective interest rate of 5%. Prepare the journal entries to record the acquisition of the gas statin and the accrual for the asset retirement obligation for the gas station on Oct. 1, 2020. (Use present value factors in the attached table for calculations. Do not use a financial calculator.)

(2) Prepare journal entries required for the gas station and the asset retirement obligation at December 31, 2020. Harvey uses straight-line depreciation. The estimated residual value of the gas station is zero.

(3) Calculate accretion expense and the beginning and ending balances of asset retirement obligation (ARO) for each of the 5 12-month periods after the acquisition of the gas station.