On January 1, 2020, COC Corp. in Alberta purchased an oil tanker depot for $ 1,200,000 cash. The company enters into a contract with the province of Alberta to operate the depot for eight years, at which time they will be legally required to dismantle the structure and remove the underground storage tanks. COC estimates this asset retirement obligation (ARO) will cost $600,000 and will take one year to complete the obligations.

COC expects the revenue generated from this depot is evenly distributed over the eight-year period and believes that 5% is the appropriate discount rate.COC uses straight-line depreciation and uses the calendar year as its fiscal year and follows IFRS.

Instruction

a)Prepare the journal entries to be recorded on January 1, 2020

b)Prepare the journal entries to be recorded on December 31, 2020.

c)With proper format, show the amounts and accounts to be reported on the classified statement of financial position at December 31, 2020.

d)Prepare the journal entries to be recorded on December 31, 2027. Show the amounts and accounts reported on the classified statement of financial position at December 31, 2027.

e) After 2027, COC was supposed to dismantle the structure and remove the underground storage tanks.Even though the company spent a considerable amount of money on restoration, it was sued by the province of Alberta for not observing the environmental requirements. On February 3, 2029, judgement was rendered against COC for $1,000,000. The company claims that because the language in the contract was misleading regarding the removal of the underground storage tanks, it plans to appeal the judgement and expects the ruling to be reduced to anywhere between $300,000 and $500,000, with$450,000 being the probable amount. COC has not yet released its 2029 financial statements. Discuss how COC should report this matter on its financial statements for the year ended December 31, 2029