E$13\mathrm{.}16($LO $5,9)($Asset Retirement Obligation$)$ Crude Oil Limited purchased an oil tanker depot on July $2,2023,$ at a cost of $$600,000$ and expects to operate the depot for $10$ years. After the

years, Crude Oil 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

Crude is less equire me dis oblige tie de coude i Tim

follows ASPE.

Instructions

a$.$ Calculate the present value of the asset retirement obligation $($that is$,$ its fair value$)$ on the date of acquisition, based on an effective interest rate of $6\%.$ Prepare the journal entries to record the

acquisition of the depot and the accrual for the asset retirement obligation for the depot on July $2,2023.$ Use $(1)$ factor Table A$\mathrm{.}2,(2)$ a financial calculator, or $(3)$ Excel function PV in your

calculations. $($Hint: For a review of present value concepts, see Chapter $3$ of Volume $1.)$ Round amounts to the nearest dollar.

b$.$ Prepare any journal entries required for the depot and the asset retirement obligation at December $31,2023.$ Crude Oil uses straight$-$line depreciation. The estimated residual value of the depot

zero.

c$.$ Show how all relevant amounts will be reported on Crude Oil's financial statements at December $31,2023.$

d$.$ Prepare the schedule to calculate the balance in the Asset Retirement Obligation account for all years from $2023$ to $2033,$ assuming there is no change in the estimated cost of dismantling the

depot.

e$.$ On June $30,2033,$ 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.

f$.$ How would the accretion expense be reported on the statement of cash flows?