Sheridan Company purchases an oil tanker depot on January $1,2025,$ at a cost of $$607,600.$ Sheridan expects to operate the depot for $10$ years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. The company estimates the dismantle and removal will cost $$71,100$ at the end of the depot's useful life.

$($a$)$

Prepare the journal entries to record the depot and asset retirement obligation for the depot on January $1,2025.$ Based on an effective$-$interest rate of $6\%,$ the present value of the asset retirement obligation on January $1,2025,$ is $$39,702.$ Use the Plant Assets account for the tanker depot. $($If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit

Asset Retirement Obligation

$($To record the depot$)$

$($To record the asset retirement obligation$)$