/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} 12BE Calaf鈥檚 Drillers erects and pl... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 13: 12BE (page 658)

Calaf鈥檚 Drillers erects and places into service an off-shore oil platform on January 1, 2018, at a cost of \(10,000,000. Calaf is legally required to dismantle and remove the platform at the end of its useful life in 10 years. Calaf estimates it will cost \)1,000,000 to dismantle and remove the platform at the end of its useful life in 10 years. (The fair value at January 1,2018, of the dismantle and removal costs is $450,000.) Prepare the entry to record the asset retirement obligation

Short Answer

Expert verified

Oil Platform will be debited and Asset Retirement Obligation will be credited by $450,000, respectively.

Step by step solution

01

Explanation of asset retirement obligation

Company is required to record the asset retirement obligation, also known as ARO, in case there is legal liability for the retirement of an asset, and the disposal amount is reasonably estimated. This disposal or removal cost is recorded at fair value.

02

Journal entry

Date

Accounts & Explanations

Debit

Credit

Jan. 1, 2018

Oil Platform

$450,000

Asset Retirement Obligation

$450,000

To record asset retirement obligation

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

(Debt Investments) Presented below is information from a bond investment amortization schedule with

related fair values provided. These bonds are classified as available-for-sale.

12/31/17 12/31/18 12/31/19

Amortized cost \(491,150 \)519,442 \(550,000

Fair value 497,000 509,000 550,000

Instructions

(a) Indicate whether the bonds were purchased at a discount or a premium.

(b) Prepare the adjusting entry to record the bonds at fair value on December 31, 2017. The Fair Value Adjustment account

has a debit balance of \)1,000 before adjustment.

(c) Prepare the adjusting entry to record the bonds at fair value on December 31, 2018.

How does unearned revenue arise? Why can it be classified properly as a current liability? Give several examples of business activities that result in unearned revenues.

Question: Distinguish between debt security and equity security.

(Payroll Tax Entries) The following is a payroll sheet for Otis Import Company for the month of September 2017. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is \(7,000. Assume a 10% federal income tax rate for all employees and a 7.65% FICA tax on employee and employer on a maximum of \)118,500. In addition, 1.45% is charged both employer and employee for an employee鈥檚 wages in excess of \(118,500 per employee.

Name

Earnings to Aug. 31

September earnings

Income tax Withholdings

FICA

Unemployment tax

State

Federal

B.D. Williams

\)6,800

$800

D. Raye

6,500

700

K. Baker

7,600

1,100

F. Lopez

13,600

1,900

A. Daniels

107,000

13,000

B. Kingston

112,000

16,000

Instructions

(a) Complete the payroll sheet and make the necessary entry to record the payment of the payroll.

(b) Make the entry to record the payroll tax expenses of Otis Import Company.

(c) Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month.

Carow Corporation purchased, as a held-for-collection investment, \(60,000 of the 8%, 5-year bonds of Harrison, Inc.

for \)65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow鈥檚 journal entries for (a) the purchase

of the investment, and (b) the receipt of semiannual interest and premium amortization
See all solutions

Recommended explanations on Business Studies Textbooks

Accounting

Read Explanation

Strategy

Read Explanation

Strategic Analysis

Read Explanation

International Business

Read Explanation

Nature of Business

Read Explanation

Change Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.