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 any 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. (photo)

4)

On Oct. 2, 2025, Harvey pays a contractor $150,400 to demolish the gas station and

decontaminate and dismantle the underground gas tanks. Prepare the journal entry for the

ARO Beginning balance Accretion Exp. ARO Ending balance 10/1/2020-10/1/2021 10/1/2021-10/1/2022 10/1/2022-10/1/2023 10/1/2023-10/1/2024 10/1/2024-10/1/2025