Sweet Company purchases an oil tanker depot on January 1, 2020, at a cost of $550,900. Sweet 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. It is estimated that it will cost $72,480 to dismantle the depot and remove the tanks at the end of the depot's useful life. (a) Your answer is correct. Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2020, is $40,472. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2020 Plant Assets 550900 cash 550900 (To record the depot) January 1, 2020 Plant Assets 40472 Asset Retirement Obligation 40472 Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Sweet uses straight-line depreciation; the estimated salvage value for the depot is zero. (Round answers to O decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2020 (To record depreciation for the depot) December 31, 2020 (To record depreciation on asset retirement obligation) December 31, 2020 (To record interest on asset retirement obligation) Determine the effective interest rate. (Round answer to 0 decimal places, e.g. 18%.) The effective-interest rate % e Textbook and Media Save for Later