Bramble Processes is involved with innovative approaches to finding energy reserves. Bramble recently built a facility to extract natural gas at a cost of $13.2 million. However, Bramble is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $15 million (the present value of which is $6.1 million). What is the journal entry required to record the asset retirement obligation? Debit Natural Gas Facility for $15000000 and credit Asset Retirement Obligation for $15000000. No journal entry required. Debit Natural Gas Facility for $1800000 and credit Asset Retirement Obligation for $1800000. Debit Natural Gas Facility for $6100000 and credit Asset Retirement Obligation for $6100000.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Bramble Processes is involved with innovative approaches to finding energy reserves. Bramble recently built a facility to extract natural gas at a cost of $13.2 million. However, Bramble is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $15 million (the present value of which is $6.1 million). What is the
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