Tamarisk Company purchases an oil tanker depot on January 1, 2025, at a cost of $572,200. Tamarisk 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 $70,740 at the end of the depot's useful life. 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 5%, the present value of the asset retirement obligation on January 1, 2025, is $43,428. Use the Plant Assets account for the tanker depot. (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. List all debit entries before credit entries.) Account Titles and Explanation (To record the depot) (To record the asset retirement obligation) Debit Credit [1]

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Tamarisk Company purchases an oil tanker depot on January 1, 2025, at a cost of $572,200. Tamarisk 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 $70,740 at the end of the depot's useful life.
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 5%, the present value of the asset retirement obligation on January 1, 2025, is $43,428. Use the Plant
Assets account for the tanker depot. (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. List all debit entries before credit entries.)
Account Titles and Explanation
(To record the depot)
(To record the asset retirement obligation)
Debit
Credit
Transcribed Image Text:Tamarisk Company purchases an oil tanker depot on January 1, 2025, at a cost of $572,200. Tamarisk 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 $70,740 at the end of the depot's useful life. 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 5%, the present value of the asset retirement obligation on January 1, 2025, is $43,428. Use the Plant Assets account for the tanker depot. (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. List all debit entries before credit entries.) Account Titles and Explanation (To record the depot) (To record the asset retirement obligation) Debit Credit
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