On January 1, Utica Auto Company built a new manufacturing facility at a total cost of $15,900,000, and paid cash. To dismantle the plant and restore the property at the end of the plant's 25-year life, market) is $850,000. Utica will depreciate the asset over its the estimated cost (in today's useful life using the straight-line method. The asset has no residual value. Utica's  cost of capital is 6%.

Requirements:

a. Prepare the journal entries required to record the acquisition of the plant asset. 

b. Prepare the journal entry to record the first year's depreciation expense and accretion expense. 

c. Prepare the journal entries required to record the disposal of the asset and the settlement of the asset retirement obligation at the end of the seventh year after acquisition. Utica sold the asset for $11,000,000 and the costs of dismantling the plant and restoring the property totaled $310,000.

Answer rating: 100% (QA)

a January 1 Plant asset 15900000 Cash 15900000 To record the acquisition of the plant asset b Deprec... View the full answer