Question
On January 1, Staley Utilities Company acquired a power plant at a total cost of $23,580,000, and paid cash. The estimated cost (in today's market)
On January 1, Staley Utilities Company acquired a power plant at a total cost of $23,580,000, and paid cash. The estimated cost (in today's market) to dismantle the plant and restore the property at the end of the plant's 15-year life is $4,859,000 Staley's cost of capital is 2. Staley will depreciate the asset over its useful life using the straight-line method. The asset has no residual value.
Requirements:
a. | Prepare the journal entries required to record the acquisition of the plant asset. |
b. | Prepare the journal entry to record the first year's depreciation and accretion accrual. Now journalize the first year's accretion accrual. |
c. | Prepare the journal entries required to record the disposal of the asset and the settlement of the asset retirement obligation at the end of the fifth year after acquisition. Staley sold the asset for $16,007,000 and the costs of dismantling the plant and restoring the property totaled $5,420,000. Begin by journalizing the disposal of the asset at the end of the fifth year after acquisition. Now journalize the settlement of the asset retirement obligation at the end of the fifth year after acquisition. |
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