Whispering Winds Limited purchased an oil tanker depot on July 2, 2020, at a cost of $ 630,000 and expects to operate the depot for 10 years. After the 10 years, the company is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $ 78,750 to do this at the end of the depots useful life. Whispering Winds follows ASPE. Click here to view the factor table PRESENT VALUE OF 1.

(n) periods	2%	2%	3%	4%	5%	6%	7%	8%	9%	10%	11%	12%	15%
1	0.98039	0.97561	0.97087	0.96156	0.95238	0.94340	0.93458	0.92593	0.91743	0.90909	0.90090	0.89286	0.86957
2	0.96117	0.95181	0.94260	0.92456	0.90703	0.89000	0.87344	0.85734	0.84168	0.82645	0.81162	0.79719	0.75614
3	0.94232	0.92860	0.91514	0.88900	0.86384	0.83962	0.81630	0.79383	0.77218	0.75132	0.73119	0.71178	0.65752
4	0.92385	0.90595	0.88849	0.85480	0.82270	0.79209	0.76290	0.73503	0.70843	0.68301	0.65873	0.63552	0.57175
5	0.90583	0.88385	0.86261	0.82193	0.78353	0.74726	0.71299	0.68058	0.64993	0.62092	0.59345	0.56743	0.49718
6	0.88797	0.86230	0.83748	0.79031	0.74622	0.70496	0.66634	0.63017	0.59627	0.56447	0.53464	0.50663	0.43233
7	0.87056	0.84127	0.81309	0.75992	0.71068	0.66506	0.62275	0.58349	0.54703	0.51316	0.48166	0.45235	0.37594
8	0.85349	0.82075	0.78941	0.73069	0.67684	0.62741	0.58201	0.54027	0.50187	0.46651	0.43393	0.40388	0.32690
9	0.83676	0.80073	0.76642	0.70259	0.64461	0.59190	0.54393	0.50025	0.46043	0.42410	0.39092	0.36061	0.28426
10	0.82035	0.78120	0.74409	0.67556	0.61391	0.55839	0.50835	0.46319	0.42241	0.38554	0.35218	0.32197	0.24719
11	0.80426	0.76214	0.72242	0.64958	0.58468	0.52679	0.47509	0.42888	0.38753	0.35049	0.31728	0.28748	0.21494
12	0.78849	0.74356	0.70138	0.62460	0.55684	0.49697	0.44401	0.39711	0.35554	0.31863	0.28584	0.25668	0.18691
13	0.77303	0.72542	0.68095	0.60057	0.53032	0.46884	0.41496	0.36770	0.32618	0.28966	0.25751	0.22917	0.16253
14	0.75788	0.70773	0.66112	0.57748	0.50507	0.44230	0.38782	0.34046	0.29925	0.26333	0.23199	0.20462	0.14133
15	0.74301	0.69047	0.64186	0.55526	0.48102	0.41727	0.36245	0.31524	0.27454	0.23939	0.20900	0.18270	0.12289
16	0.72845	0.67362	0.62317	0.53391	0.45811	0.39365	0.33873	0.29189	0.25187	0.21763	0.18829	0.16312	0.10687
17	0.71416	0.65720	0.60502	0.51337	0.43630	0.37136	0.31657	0.27027	0.23107	0.19785	0.16963	0.14564	0.09293
18	0.70016	0.64117	0.58739	0.49363	0.41552	0.35034	0.29586	0.25025	0.21199	0.17986	0.15282	0.13004	0.08081
19	0.68643	0.62553	0.57029	0.47464	0.39573	0.33051	0.27651	0.23171	0.19449	0.16351	0.13768	0.11611	0.07027
20	0.67297	0.61027	0.55368	0.45639	0.37689	0.31180	0.25842	0.21455	0.17843	0.14864	0.12403	0.10367	0.06110

Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.

(n) Periods	2%	2%	3%	4%	5%	6%	7%	8%	9%	10%	11%	12%	15%
1	0.98039	0.97561	0.97087	0.96154	0.95238	0.94340	0.93458	0.92593	0.91743	0.90909	0.90090	0.89286	0.86957
2	1.94156	1.92742	1.91347	1.88609	1.85941	1.83339	1.80802	1.78326	1.75911	1.73554	1.71252	1.69005	1.62571
3	2.88388	2.85602	2.82861	2.77509	2.72325	2.67301	2.62432	2.57710	2.53130	2.48685	2.44371	2.40183	2.28323
4	3.80773	3.76197	3.71710	3.62990	3.54595	3.46511	3.38721	3.31213	3.23972	3.16986	3.10245	3.03735	2.85498
5	4.71346	4.64583	4.57971	4.45182	4.32948	4.21236	4.10020	3.99271	3.88965	3.79079	3.69590	3.60478	3.35216
6	5.60143	5.50813	5.41719	5.24214	5.07569	4.91732	4.76654	4.62288	4.48592	4.35526	4.23054	4.11141	3.78448
7	6.47199	6.34939	6.23028	6.00205	5.78637	5.58238	5.38929	5.20637	5.03295	4.86842	4.71220	4.56376	4.16042
8	7.32548	7.17014	7.01969	6.73274	6.46321	6.20979	5.97130	5.74664	5.53482	5.33493	5.14612	4.96764	4.48732
9	8.16224	7.97087	7.78611	7.43533	7.10782	6.80169	6.51523	6.24689	5.99525	5.75902	5.53705	5.32825	4.77158
10	8.98259	8.75206	8.53020	8.11090	7.72173	7.36009	7.02358	6.71008	6.41766	6.14457	5.88923	5.65022	5.01877
11	9.78685	9.51421	9.25262	8.76048	8.30641	7.88687	7.49867	7.13896	6.80519	6.49506	6.20652	5.93770	5.23371
12	10.57534	10.25776	9.95400	9.38507	8.86325	8.38384	7.94269	7.53608	7.16073	6.81369	6.49236	6.19437	5.42062
13	11.34837	10.98319	10.63496	9.98565	9.39357	8.85268	8.35765	7.90378	7.48690	7.10336	6.74987	6.42355	5.58315
14	12.10625	11.69091	11.29607	10.56312	9.89864	9.29498	8.74547	8.24424	7.78615	7.36669	6.98187	6.62817	5.72448
15	12.84926	12.38138	11.93794	11.11839	10.37966	9.71225	9.10791	8.55948	8.06069	7.60608	7.19087	6.81086	5.84737
16	13.57771	13.05500	12.56110	11.65230	10.83777	10.10590	9.44665	8.85137	8.31256	7.82371	7.37916	6.97399	5.95424
17	14.29187	13.71220	13.16612	12.16567	11.27407	10.47726	9.76322	9.12164	8.54363	8.02155	7.54879	7.11963	6.04716
18	14.99203	14.35336	13.75351	12.65930	11.68959	10.82760	10.05909	9.37189	8.75563	8.20141	7.70162	7.24967	6.12797
19	15.67846	14.97889	14.32380	13.13394	12.08532	11.15812	10.33560	9.60360	8.95012	8.36492	7.83929	7.36578	6.19823
20	16.35143	15.58916	14.87747	13.59033	12.46221	11.46992	10.59401	9.81815	9.12856	8.51356	7.96333	7.46944	6.25933

A)

Calculate the present value of the asset retirement obligation (that is, its fair value) on the date of acquisition, based on an effective interest rate of 6%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.)

B) Prepare the journal entries to record the acquisition of the depot and the accrual for the asset retirement obligation for the depot on July 2, 2020. Use (1) factor Table A.2, (2) a financial calculator, or (3) Excel function PV in your calculations. (Hint: For a review of present value concepts, see Chapter 3 of Volume 1.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)A)

C)

Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Whispering Winds uses straight-line depreciation. The estimated residual value of the depot is zero. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

D)

Show how all relevant amounts will be reported on Whispering Winds Limiteds financial statements at December 31, 2020. (Round answers to 0 decimal places, e.g. 5,250.)

E)

Prepare the schedule to calculate the balance in the Asset Retirement Obligation account for all years from 2020 to 2030, assuming there is no change in the estimated cost of dismantling the depot. (Round answers to 2 decimal places, e.g. 5,275.23.)

On June 30, 2030, Whispering Winds pays a demolition firm to dismantle the depot and remove the tanks at a cost of $ 84,000.F)

Prepare the journal entry for the settlement of the asset retirement obligation. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)