Recording Asset Retirement Obligation BPP Company maintains underground storage tanks for its operations. A new storage tank was installed and made ready for use at a cost of $1,800,000 on January 1 of the current year. The tank's useful life is estimated at 15 years, at which time the company is legally required to remove the tank and restore the area at an estimated cost of $180,000. The appropriate discount rate for the company is 12%. Required a. On January 1, record the entry for (1) the purchase and installation of the storage tank and (2) the related asset retirement obligation. b. Record adjusting entries on December 31 of the current year for (1) depreciation and (2) accretion. c. Assume that on December 31, fifteen years later, the tank is safely removed at a cost of $207,000. Record the required journal entry. Note: Round answers to the nearest whole dollar. a. 1. Jan. 1 Equipment Cash a. 2. Jan. 1 Account Name To record purchase of storage tank Equipment Asset Retirement Obligation To record asset retirement obligation Depreciation Expense Dr. 1,800,000 Cr. 0 0 1,800,000 328,860 0 0 x 328,860 x b. 1. Dec. 31 Accumulated Depreciation 141,924 0x 141,924 x To record depreciation b. 2. Dec. 31 Accretion Expense Asset Retirement Obligation 39,462 0 x 0 39,462 x To record accretion c. Dec. 31, Year 15 Asset Retirement Obligation 180,000 0 Loss on Settlement of Asset Retirement Obligation Cash 27,000 0 0 207,000 To record asset retirement