Question
Question 1 . On January 1 of the current year, Bolton Oil invested $6,500,000 to construct an offshore oil platform, and paid cash. As part
Question 1.
On January 1 of the current year, Bolton Oil invested $6,500,000 to construct an offshore oil platform, and paid cash. As part of its offshore drilling agreement, Bolton is responsible for dismantling and removing the platform at the end of its 15-year useful life. Bolton depreciates the platform by using the straight-line method with no residual value expected at the end of its useful life.
The company's estimated cost of capital is 3%
The asset did not have a reasonably determinable quoted market price and market comparables are not available. As a result, Bolton decided to use aprobability-based estimate of the cost of dismantling and removing the platform to estimate the fair value of the retirement obligation. The probability-based estimate employs the expected cash flows needed to comply with the offshore drilling agreement based on costs of dismantling and removal in today's market. The estimated values are as follows:
Estimated Future Cash Flows Probability of Occurrence
$610,000 63%
$780,000 27%
$1,110,000 10%
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 eighth year after acquisition. Bolton sold the asset for $990,000 and the costs of dismantling and removing the offshore oil platform totaled $1,300,000. (Record debits first, then credits. Exclude explanations from any journal entries. Round intermediary computations and your final answers to the nearest whole dollar.)
a. Begin by journalizing the disposal of the asset at the end of the eighth year after acquisition
b. Now journalize the settlement of the asset retirement obligation at the end of the eighth year after acquisition
Question 2.
Brennan Corporation employs 43 production workers and pays them all the same salary. Brennan employs 6 administrative staff personnel and pays them all the same salary. The following annual information is available for each employee group.
Description Production Administrative
Salaries and wages $2,150,000 $570,000
Federal income tax rate 16% 25%
State and local income tax rate 9% 11%
FICA and Medicare tax rate 7.65 7.65%
Federal unemployment tax rate effective 2.4% 2.4%
State unemployment tax - effective (wage cap 1.4% 1.4%
per employee = $7,000)
Prepare the journal entry necessary to record Brennan's payroll tax expense for the annual payroll.
remember this is just an example
the first: 7000 x # of workers 58 x 2.8% = tax
7000 x # of workers 58 x 1.8 = tax
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