Crude Oil Limited purchases an oil tanker depot on July 2, 2011, at a cost of $600,000 and expects to operate the depot for 10 years. After the 10 years, the company is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $75,000 to do this at the end of the depot's useful life. Crude Oil follows private enterprise GAAP.

Instructions

(a) Prepare the journal entries to record the acquisition of the depot and the asset retirement obligation for the depot on July 2, 2011. Based on an effective interest rate of 6%, the present value of the asset retirement obligation (i.e., its fair value) on the date of acquisition is $41,879.

(b) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2011. Crude Oil uses straight-line depreciation. The estimated residual value of the depot is zero.

(c) On June 30, 2021, Crude Oil pays a demolition firm to dismantle the depot and remove the tanks at a cost of $80,000.

Prepare the journal entry for the settlement of the asset retirement obligation.

(d) Prepare the schedule to calculate the balance in the asset retirement obligation account for all years from 2011 to 2021, assuming there is no change in the estimated cost of dismantling the depot.

(e) Show how all relevant amounts will be reported on Crude Oil Limited's financial statements at December 31, 2011.

(f) How would the accretion expense be reported on the statement of cash flows?

(g) Discuss how Crude Oil would account for the asset retirement costs and obligations if the company reports under IFRS. Be specific.