Refer to the information for Lu Corp. in BE13-18 and BE13-19. Assume that the increase in the

Question:

Refer to the information for Lu Corp. in BE13-18 and BE13-19. Assume that the increase in the asset retirement obligation in 2014 related to the production of oil in 2014 was $54,027. Prepare any necessary entries to record the increase in the asset retirement obligation at December 31, 2014, assuming that Lu follows

(a) IFRS, and

(b) ASPE.

obligation.

Data From BE13-18

Lu Corp. erected and placed into service an offshore oil platform on January 1, 2014, at a cost of $10 million. Lu is legally required to dismantle and remove the platform at the end of its nine-year useful life. Lu estimates that it will cost $1 million to dismantle and remove the platform at the end of its useful life and that the discount rate to use should be 8%. Prepare the entry to record the asset retirement obligation.

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...