Friendly Gas Co. purchases a gas station and convenience store on January 1, 2022, at a...
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Friendly Gas Co. purchases a gas station and convenience store on January 1, 2022, at a cost of £875,000. Friendly expects to operate the store and gas station for 20 years. The company is legally required to remove the underground gas storage tanks from the facility at the end of its useful life. Friendly estimates that it will cost £120,000 to remove the tanks at the end of the facility's useful life. Instructions Round all calculations to the nearest dollar. a. Prepare the journal entries to record the purchase of the gas station/convenience store, as well as the asset retirement obligation for the gas station/convenience store on January 1, 2022. Based on an effective-interest rate of 8%, the present value of the asset retirement obligation on January 1, 2022, is £25,746. b. Prepare any journal entries required for the gas station/convenience store and the asset retirement obligation on December 31, 2022. Friendly uses straight-line depreciation; the estimated salvage value for the facility is zero. c. On December 31, 2041, Friendly pays an environmental contractor to dismantle and remove the underground storage tanks at a price of £131,000. Prepare the journal entry for the settlement of the asset retirement obligation. Friendly Gas Co. purchases a gas station and convenience store on January 1, 2022, at a cost of £875,000. Friendly expects to operate the store and gas station for 20 years. The company is legally required to remove the underground gas storage tanks from the facility at the end of its useful life. Friendly estimates that it will cost £120,000 to remove the tanks at the end of the facility's useful life. Instructions Round all calculations to the nearest dollar. a. Prepare the journal entries to record the purchase of the gas station/convenience store, as well as the asset retirement obligation for the gas station/convenience store on January 1, 2022. Based on an effective-interest rate of 8%, the present value of the asset retirement obligation on January 1, 2022, is £25,746. b. Prepare any journal entries required for the gas station/convenience store and the asset retirement obligation on December 31, 2022. Friendly uses straight-line depreciation; the estimated salvage value for the facility is zero. c. On December 31, 2041, Friendly pays an environmental contractor to dismantle and remove the underground storage tanks at a price of £131,000. Prepare the journal entry for the settlement of the asset retirement obligation.
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a Journal entries on January 1 2022 1 To record the purchase of the gas stationconvenience store Deb... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 9781119607519
4th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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