During 2024, Bramble constructed a small manufacturing facility specifically to manufacture one particular accessory. Bramble paid the construction contractor $5,251,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, Bramble anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, Bramble remediate the facility so that it can be used as a community center, Bramble estimates the cost of remediation will be $453,300. Bramble uses straight-line depreciation with $0 salvage value for its plant asset and a 12% discount rate for asset retirement obligations. Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places e.g. 5,125.) Account Titles and Explanation Plant Assets Cash (To record payment to contractor) Plant Assets Asset Retirement Obligation (To record asset retirement obligation) Account Titles and Explanation (To record depreciation) Asset Retirement Obligation Debit (To record interest) 5251000 145949 Prepare adjusting entries to record depreciation and accretion expense on December 31, 2025. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 0 decimal places, e.g. 5,125.) Debit Credit LII 5251000 145949 Credit
During 2024, Bramble constructed a small manufacturing facility specifically to manufacture one particular accessory. Bramble paid the construction contractor $5,251,000 cash (which was the total contract price) and placed the facility into service on January 1, 2025. Because of technological change, Bramble anticipates that the manufacturing facility will be useful for no more than 10 years. The local government where the facility is located required that, at the end of the 10-year period, Bramble remediate the facility so that it can be used as a community center, Bramble estimates the cost of remediation will be $453,300. Bramble uses straight-line depreciation with $0 salvage value for its plant asset and a 12% discount rate for asset retirement obligations. Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places e.g. 5,125.) Account Titles and Explanation Plant Assets Cash (To record payment to contractor) Plant Assets Asset Retirement Obligation (To record asset retirement obligation) Account Titles and Explanation (To record depreciation) Asset Retirement Obligation Debit (To record interest) 5251000 145949 Prepare adjusting entries to record depreciation and accretion expense on December 31, 2025. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 0 decimal places, e.g. 5,125.) Debit Credit LII 5251000 145949 Credit
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 13E: On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million....
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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.
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Transcribed Image Text:During 2024, Bramble constructed a small manufacturing facility specifically to manufacture one particular accessory. Bramble paid
the construction contractor $5,251,000 cash (which was the total contract price) and placed the facility into service on January 1,
2025. Because of technological change, Bramble anticipates that the manufacturing facility will be useful for no more than 10 years.
The local government where the facility is located required that, at the end of the 10-year period, Bramble remediate the facility:
that it can be used as a community center. Bramble estimates the cost of remediation will be $453,300.
Bramble uses straight-line depreciation with $0 salvage value for its plant asset and a 12% discount rate for asset retirement
obligations.
Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Credit
account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for
the account titles and enter O for the amounts. List all debit entries before credit entries. Round present value factor calculations to 5
decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.)
Account Titles and Explanation
Plant Assets
Cash
(To record payment to contractor)
Plant Assets
Asset Retirement Obligation
(To record asset retirement obligation)
Show Transcribed Text
Account Titles and Explanation
(To record depreciation)
Asset Retirement Obligation
Debit
(To record interest)
5251000
145949
Prepare adjusting entries to record depreciation and accretion expense on December 31, 2025. (Credit account titles are
automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles
and enter O for the amounts. List all debit entries before credit entries. Round answers to 0 decimal places, e.g. 5,125.)
Credit
Debit
5251000
145949
Credit
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