FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Related questions
Question
Oil Products Company purchases an oil tanker depot on January 1, 2020, at a cost of $600,000. Oil Products 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 $75,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life.
Instructions
a. 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 $41,879.
b. Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Oil Products uses straight-line
c. On December 31, 2029, Oil Products pays a demolition firm to dismantle the depot and remove the tanks at a price of $80,000. Prepare the
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The Depreciators Inc purchases and begins using equipment costing $175 on Sept 1, 2020. There was an additional cost of $15 for delivery and installation. The Depreciators expects to use the equipment over a 3 year useful life and estimates the salvage value to be $10. DI uses the straight line method for calculating depreciation. Determine the following. Pay attention to the dates being asked!: a) Net Book Value of the equipment as of December 31, 2020 $ b) Depreciation Expense for the year ending Dec 31, 2021 $ c) Accumulated Depreciation for the year ending Dec 31, 2023 You must show your work on your PDF upload to receive credit. You may prepare journals, TAccounts, or a table to determine your answers. The choice is yours, but your calculations should be logically presented so I can follow what you have done.arrow_forwardTinker Bell Company sold a delivery wing truck on March 1, 2022. Tinker had acquired the wing truck on January 1, 2019, for $ 52,000. At acquisition, Tinker had estimated that the truck would have a useful life of 6 years and a residual value of $4,000. On December 31, 2021, the truck had a book value of $ 28,000. Required: Prepare the journal entries to recognized the depreciation expense for 2022 prior to the sale and the sale of the truck assuming the truck sold at the following different prices (you will have 3 entries total): $32,000 26,000arrow_forwardCurrent Attempt in Progress Whispering Company purchased a machine on July 1, 2026, for $31,080. Whispering paid $222 in title fees and delinquent county property taxes of $139 on the machine. In addition, Whispering paid $555 shipping charges for delivery, and $527 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 6 years with a salvage value of $3,330. Determine the depreciation base of Whispering's new machine. Whispering uses straight-line depreciation. Depreciation base $arrow_forward
- Memanarrow_forwardOn August 31, 2019, CAMELLIA Company purchased a new machinery for ₱540,000. The machinery has an estimated useful life of 5 years and depreciation is computed using the SYD method. Estimated salvage value of the machine is ₱60,000. Questions: What is the total accumulated depreciation on December 31, 2020? If CAMELLIA decides to change its depreciation method to straight-line at the start of 2021, what is the depreciation expense for the year ended December 31, 2021? * Present solutions.arrow_forwardProperty,plant and equipment Birkey Company purchased equipment on January 1, 2020, at a total cost of $99,000. The machinery’s estimated useful life is 8 years or 60,000 hours, and its residual value is $9,000. During 2020 and 2021, the machinery was used 7,000 and 8,00 hours, respectively. This information will be used for Parts 1, 2, and 3 of this problem. It will be repeated in each part. Property,plant and equipment Birkey Company purchased equipment on January 1, 2020, at a total cost of $99,000. The machinery’s estimated useful life is 8 years or 60,000 hours, and its residual value is $9,000. During 2020 and 2021, the machinery was used 7,000 and 8,00 hours, respectively. This information will be used for Parts 1, 2, and 3 of this problem. It will be repeated in each part. What is the book value on Dec. 31, 2020, after the adjusting entry (straight-line)? Show your calculations Blank 1. Fill in the blank, read surrounding text. Book Value, Dec 31, 2020…arrow_forward
- On January 1, 2022, Pina Colada Country Club purchased a new riding mower for $29,000. The mower is expected to have a 8-year life with a $8,000 salvage value.What journal entry would Pina Colada make on December 31, 2022, if it uses straight-line depreciation? (Credit account titles are automatically indented when 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.) Date Account Titles and Explanation Debit Credit Dec. 31 enter an account title for the journal entry on December 31 enter a debit amount enter a credit amount enter an account title for the journal entry on December 31 enter a debit amount enter a credit amountarrow_forwardJayarrow_forwardBlossom Company purchased a large piece of equipment on October 1, 2023. The following information relating to the equipment was gathered at the end of October: Price Credit terms $40,000 2/10, n/30 Engineering costs $3,000 Maintenance costs during regular production operations $6,000 It is expected that the equipment could be used for 12 years, after which the salvage value would be zero. Blossom intends to use the equipment for only 10 years, however, after which it expects to be able to sell it for $2,600. The equipment was delivered on October 1 and the invoice for the equipment was paid on October 9, 2023. Blossom uses the calendar year to prepare financial statements. Blossom follows IFRS for financial statement purposes. (a) Calculate the depreciation expense for the years indicated using the following methods. (Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.) 1. Straight-line method for 2023 $ 2. Sum-of-the-years'-digits method for…arrow_forward
- Blossom Limited purchased a machine on account on April 1, 2021, at an invoice price of $365,470. On April 2, it paid $2,170 for delivery of the machine. A one-year, $4,120 insurance policy on the machine was purchased on April 5. On April 19, Blossom paid $7,580 for installation and testing of the machine. The machine was ready for use on April 30. Blossom estimates the machine's useful life will be five years or 6,118 units with a residual value of $87,910. Assume the machine produces the following numbers of units each year: 893 units in 2021; 1,448 units in 2022; 1,426 units in 2023; 1,222 units in 2024; and 1,129 units in 2025. Blossom has a December 31 year end. (a) Your Answer Correct Answer Your answer is correct. Determine the cost of the machine. acerarrow_forwardCarla Vista Electronics purchased packaging equipment for $576,000 cash on July 1, 2022. Management estimates the equipment can package 768,000 inventory units and will be productive for 5 years. Its salvage value is estimated at $48,000. During 2022, the equipment packaged 124,800 units, with another 134,400 units in 2022. Compute the annual depreciation expense for 2022 and 2023, and book value at December 31, 2023, under the straight-line method. 2022 depreciation 2023 depreciation December 31, 2023 book value $ $ $arrow_forwardOn January 1, 2024, a company began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2025. Expenditures on the project were as follows: January 1, 2024 $ 280,000 September 1, 2024 $ 360,000 December 31, 2024 $360,000 March 31, 2025 $ 360,000 September 30, 2025 $ 280,000 The company borrowed $770,000 on a construction loan at 10% interest on January 1, 2024. This loan was outstanding throughout the construction period. The company had $4,600,000 in 10% bonds payable outstanding in 2024 and 2025. Interest (using the specific interest method) capitalized for 2025 was: Multiple Choice A) $57,750. B) $97,070. C ) $113,820. D) $96,000.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education