On January $1$ of the current$$ year, HoldOn Telecommunication invested idle cash of $ $14$ comma $000$ comma $000$ in transmission towers and $ $8$ comma $000$ comma $000$ in poles and lines to improve service to its customers. The$$ company's estimated cost of capital is $4\%.$ is responsible for dismantling and removing the$$ towers, poles, and lines at the end of their useful lives under each$$ city's and$$ town's removal and restoration requirements. The towers have a $8-$year useful$$ life, and the poles and lines have a $16-$year useful life. HoldOn uses the$$ straight$-$line method for depreciation with no residual value expected at the end of the useful lives of the assets. HoldOn estimates the cost to dismantle and restore property related to the towers at $ $925$ comma $000.$ Even though the poles and line method of transmission has been used for many$$ years, HoldOn is installing these in numerous cities and towns.$$ Recently, cities and towns have been increasing their standards for removal and restoration.$$ Therefore, the costs to remove and restore the poles and lines do not have a reasonably determinable quoted market$$ price, and market comparables are not available. As a$$ result, HoldOn decided to use a$$ probability$-$based estimate. The$$ probability$-$based estimate employs the expected cash flows needed for the costs of dismantling and removal. The estimated values are as$$ follows:

Estimated Future Cash Flows

Probability of Occurrence

$$49,500$

$3$

$\%$

$330,000$

$22$

$780,000$

$39$

$995,00036$ Requirement a$.$ Prepare the journal entries required to record the acquisition of each asset. $($Record debits$$ first, then credits. Exclude explanations from any journal entries. Use the present value and future value$$ tables, a financial$$ calculator, or a spreadsheet for your calculations. If using present and future value tables or the formula$$ method, use factor amounts rounded to five decimal$$ places, X$.$XXXXX$.$ Round your answers to the nearest whole$$ dollar.$)$

Begin by journalizing the cash investment in the transmission towers. Do not record the asset retirement obligation related to this investment. We will do that in another step.

Account

January $1,$ Current Year

Part $2$

Now journalize the cash investment in the poles and lines. Do not record the asset retirement obligation related to this investment. We will do that in another step.

Account

January $1,$ Current Year

Part $3$

Now journalize the asset retirement obligation related to the transmission towers on January $1.$

Account

January $1,$ Current Year

Part $4$

Now journalize the asset retirement obligation related to the poles and lines on January $1.$

Account

January $1,$ Current Year

Part $5$

Requirement b$.$ Prepare the journal entry to record the first and second$$ year's depreciation and accretion accrual for each asset. $($Record debits$$ first, then credits. Exclude explanations from any journal entries. Round any intermediary calculations and your final answers to the nearest whole$$ dollar.$)$

$$We$\text{'}$ll start by preparing the necessary entries for the transmission towers.

Begin by journalizing the first$$ year's depreciation for the transmission towers.

Account

December $31,$ Current Year

Part $6$

Now journalize the second$$ year's depreciation for the transmission towers.

Account

December $31,$ Subsequent Year

Part $7$

Now journalize the first$$ year's accretion accrual for the transmission towers.

Account

December $31,$ Current Year

Part $8$

Now journalize the second$$ year's accretion accrual for the transmission towers.

Account

December $31,$ Subsequent Year

Part $9$

$$Next$,$ let's prepare the necessary entries for the poles and lines.

Begin by journalizing the first$$ year's depreciation for the poles and lines.

Account

December $31,$ Current Year

Part $10$

Now journalize the second$$ year's depreciation for the poles and lines.

Account

December $31,$ Subsequent Year

Part $11$

Now journalize the first$$ year's accretion accrual for the poles and lines.

Account

December $31,$ Current Year

Part $12$

Now journalize the second$$ year's accretion accrual for the poles and lines.

Account

December $31,$ Subsequent Year

Part $13$

Requirement c$.$ What is the carrying value of each asset at the end of the second$$ year? What is the carrying value of the ARO$($asset retirement$$ obligation$)$ at the end of the second$$ year? $($Round intermediary computations and your final answers to the nearest whole$$ dollar.$)$

Refer to the entries for Requirement a$.$LOADING...

Refer to the entries for Requirement b$.$LOADING...

Transmission Towers

Poles and Lines