FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paid
the construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1,
2025. Because of technological change, Sheffield anticipates that the manufacturing facility will be useful for no more than 10 years.
The local government where the facility is located required that, at the end of the 10-year period, Sheffield remediate the facility so
that it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400.
Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement
obligations.
(a)
Your answer is partially correct.
Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (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 O for the amounts. List all debit entries before credit entries. Round present value factor calculations to 5
decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.)
Account Titles and Explanation
Plant Assets
Cash
(To record payment to contractor)
Plant Assets
Asset Retirement Obligation
(To record asset retirement obligation)
Debit
5053000
229115
Credit
5053000
0
229115
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Transcribed Image Text:During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paid the construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, Sheffield anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, Sheffield remediate the facility so that it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400. Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement obligations. (a) Your answer is partially correct. Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (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 O for the amounts. List all debit entries before credit entries. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.) Account Titles and Explanation Plant Assets Cash (To record payment to contractor) Plant Assets Asset Retirement Obligation (To record asset retirement obligation) Debit 5053000 229115 Credit 5053000 0 229115
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