Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 13.3P
a.
To determine
To prepare: The journal for recording investment in the offshore oil platform.
b.
To determine
To prepare: The journal for recording depreciation and accretion accrual for the first year.
c.
To determine
To prepare: The Journal entries for recording disposal of the asset and the settlement of the asset retirement obligation.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On January 1,2020 Petron Company purchased an oil tanker depot at the cost of P 7,000,000 the entity is expected to operate the depot for five years, after which it is legally required to dismantle the depot and remove the underground storage tanks. The oil tanker depot is depreciated using the straight line method with no residual value. It is reliably estimated that the cost of decommissioning the depot will amount to P 1,500,000. The appropriate Discount rate is 10%. The present value of 1 at 10% for five period is 0.62. At the beginning of 2022, the entity reliably estimated that the carrying amount of decommissioning liability is P 120,000 under what it should be. The discount rate remains at 10%.
On December 31,2024 after 5 years of operating the entity paid a demolition entity to dismantle the depot at a price of P 1,700,000
Required: Prepare all the required Journal Entries from January 1,2020 up to December 31,2024
At
On August 3,Cinco construction purchased special-purpose equipment at a cost of$9,139,000. The useful life of the equipment was estimated to be eight years,with an estimated residual value of $34,300.
what is the depreciation expense to be recognized each calenders year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense?
Calaf’s Drillers erects and places into service an off-shore oil platform on January 1, 2021, 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, 2021, of the dismantle and removal costs is $450,000.) Prepare the entry to record the asset retirement obligation.
Chapter 13 Solutions
Intermediate Accounting (2nd Edition)
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - Prob. 13.3QCh. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.1MCCh. 13 - Prob. 13.2MCCh. 13 - Prob. 13.3MCCh. 13 - Medical Services Inc allows employees at the end...Ch. 13 - Trade Notes Payables. On February 1, Seville...Ch. 13 - Unearned Revenues. On June 1 of the current year,...Ch. 13 - Unearned Revenues. GoSnow Inc. provides snow...Ch. 13 - Prob. 13.4BECh. 13 - Prob. 13.5BECh. 13 - Prob. 13.6BECh. 13 - Sales Taxes Payable. Kloth Fabric Store operates...Ch. 13 - Prob. 13.8BECh. 13 - Prob. 13.9BECh. 13 - Prob. 13.10BECh. 13 - Asset Retirement Obligation at Acquisition. On...Ch. 13 - Prob. 13.12BECh. 13 - Asset Retirement Obligation, Disposal. Buckner...Ch. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Warranty Liability, Assurance-Type Warranty,...Ch. 13 - Prob. 13.19BECh. 13 - Prob. 13.20BECh. 13 - Trade Notes Payable. On November 1, Barcelona...Ch. 13 - Unearned Revenues. On May 1 of the current year,...Ch. 13 - Gift Cards. Diamond Depot sold 57,000 of gift...Ch. 13 - Sales Taxes Payable. Eaton Technology operates...Ch. 13 - Prob. 13.5ECh. 13 - Asset Retirement Obligation. On January 1,...Ch. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Accounting for Premiums. Supergreen Grocers, Inc....Ch. 13 - Prob. 13.13ECh. 13 - Payroll Taxes Payable, Pay Exceeds. Wage Base....Ch. 13 - Current Operating Liabilities. James Stores, Inc....Ch. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Payroll Taxes Payable. Jackson Corporation employs...Ch. 13 - Prob. 1JCCh. 13 - Prob. 2JCCh. 13 - Prob. 3JCCh. 13 - Financial Statement Analysis Case You are...Ch. 13 - Surfing the Standards Case 1: Environmental...Ch. 13 - Prob. 2SSCCh. 13 - Prob. 1BCC
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
- Albany Corporation purchased equipment at the beginning of Year 1 for 75,000. The asset does not have a residual value and is estimated to be in service for 8 years. Calculate the depreciation expense for Years 1 and 2 using the double-declining-balance method. Round to the nearest dollar.arrow_forwardOn January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.arrow_forwardBliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.arrow_forward
- Akron Incorporated purchased an asset at the beginning of Year 1 for 375,000. The estimated residual value is 15,000. Akron estimates that the asset has a service life of 5 years. Calculate the depreciation expense using the sum-of-the-years-digits method for Years 1 and 2 of the assets life.arrow_forwardKam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.arrow_forwardOn January 1, 2021, Cake Company acquired a factory equipment at a cost of P450,000. The equipment is being depreciated using the straight-line method over its projected useful life of 10 years. On December 31, 2022, a determination was made that the asset's recoverable amount was only P288,000. On December 31, 2023, the assets recoverable amount was determined to be P333,000 and management believes that the impairment loss previously recognized should be reversed. What amount of impairment loss should be recognized on December 31, 2022?arrow_forward
- On January 1, Year 1, Lowing Company acquired a patent from Generics Research Corporation for $3 million. The legal life of the patent is 20 years, but Lowing expects to use it for 5 years. Pawson Company has committed to purchase the patent from Lowing for $500,000 at the end of that 5-year period. Lowing uses the straight-line method to amortize intangible assets with finite useful lives. What is the amount of amortization expense each year?arrow_forwardThe following transactions occurred during 2020. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 A building that cost $132,000 in 2003 is torn down to make room for a new building. The wrecking contractor was paid $5,100 and was permitted to keep all materials salvaged. Mar. 10 Machinery that was purchased in 2013 for $16,000 is sold for $2,900 cash, f.o.b. purchaser’s plant. Freight of $300 is paid on the sale of this machinery. Mar. 20 A gear breaks on a machine that cost $9,000 in 2012. The gear is replaced at a cost of $2,000. The replacement does not extend the useful life of the machine but does make the machine more efficient. May 18 A special base installed for a machine in 2014 when the…arrow_forwardEL Corporation, an entity under the mining industry, incurred a total of ₱20,000,000 on March 31, 2018 for the acquisition, exploration, and development of its wasting asset. The entity estimates that a total of 50,000 units of recoverable deposits can be extracted within 5 years. On the same date, the entity purchased a mining equipment which can only be used for the extraction of the recoverable deposits. The cost of the equipment is ₱15,000,000, the estimated useful life is 8 years, and the residual value is P3,000,000.The entity was able to extract 5,500 units in 2018, and 11,800 units in 2019. How much is the depreciation expense in 2018?arrow_forward
- The following transactions occurred during 2020. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 A building that cost $147,840 in 2003 is torn down to make room for a new building. The wrecking contractor was paid $5,712 and was permitted to keep all materials salvaged. Mar. 10 Machinery that was purchased in 2013 for $17,920 is sold for $3,248 cash, f.o.b. purchaser’s plant. Freight of $336 is paid on the sale of this machinery. Mar. 20 A gear breaks on a machine that cost $10,080 in 2012. The gear is replaced at a cost of $2,240. The replacement does not extend the useful life of the machine but does make the machine more efficient. May 18 A special base installed for a machine in 2014…arrow_forwardOn August 1, 2022, Mendez Corporation purchased a new machine on a deferred payment basis. A down payment of €2,000 was made and 4 annual installments of €6,000 each are to be made beginning on September 1, 2022. The cash equivalent price of the machine was €23,000. Due to an employee strike, Mendez could not install the machine immediately, and thus incurred €300 of storage costs. Costs of installation (excluding the storage costs) amounted to €800. The amount to be capitalized as the cost of the machine is :- €23,000. €23,800 €26,000. €24,100arrow_forwardMaris Co. purchased a machine on January 1, 2020, for $2,500,000 for the express purpose of leasing it. The machine is expected to have a five-year life, no salvage value, and be depreciated on a straight-line monthly basis. On April 1, 2020, under a cancelable lease, Maris leased the machine to Dunbar Company for $750,000 a year for a four-year period ending March 31, 2024. Maris incurred total maintenance and other related costs under the provisions of the lease of $25,000 relating to the year ended December 31, 2020. Harley paid $750,000 to Maris on April 1, 2020. Instructions [Assume the operating method is appropriate for parts (a) and (b).] (a) Under the operating method, what should be the income before income taxes derived by Maris Co. from this lease for the year ended December 31, 2020? (b) What should be the amount of rent expense incurred by Dunbar from this lease for the year ended December 31, 2020?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning