Sahel Co., a publicly traded entity, just completed the construction of an asset on January 1, 2021,
Question:
Sahel Co., a publicly traded entity, just completed the construction of an asset on January 1, 2021, at a total cost of $60,000,000. Legal fees during the construction were $50,000. The expected useful life of the asset is 50 years after which it will have to be decommissioned (dismantled) at an expected cost of $10,000,000. The relevant discount rate is 4%. Sahel uses the straight line method of depreciation.
Required:
a. Prepare all journal entries related to the asset for the years 2021 and 2022.
b. During 2028, the estimate to decommission the asset changes and is now estimated to be $20,000,000. In addition, the estimate of the discount rate has increased to 5%. Prepare all the journal entries in 2028.
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1111534912
8th edition
Authors: Gary A. Porter, Curtis L. Norton