Flounder Corp. erected and placed into service an offshore oil platform on January 1, 2023, at a cost of $12 million. Flounder is legally required to dismantle and remove the platform at the end of its ten-year useful life. Flounder estimates that it will cost $1.2 million to dismantle and remove the platform at the end of its useful life and that the discount rate to use should be 9%. Using (a) factor Table A.2, (b) a financial calculator, or (c) Excel function PV. Ignore production related costs for this question. Asset Retirement Obligation (a) Your answer is partially correct. $506,892 Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related expenses at December 31, 2023, assuming that Flounder follows IFRS. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Depreciation Expense Accumulated Depreciation - Drilling Platform (To record depreciation expense) Interest Expense Asset Retirement Obligation (To record interest expense) Debit 45620 Credit 456
Flounder Corp. erected and placed into service an offshore oil platform on January 1, 2023, at a cost of $12 million. Flounder is legally required to dismantle and remove the platform at the end of its ten-year useful life. Flounder estimates that it will cost $1.2 million to dismantle and remove the platform at the end of its useful life and that the discount rate to use should be 9%. Using (a) factor Table A.2, (b) a financial calculator, or (c) Excel function PV. Ignore production related costs for this question. Asset Retirement Obligation (a) Your answer is partially correct. $506,892 Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related expenses at December 31, 2023, assuming that Flounder follows IFRS. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Depreciation Expense Accumulated Depreciation - Drilling Platform (To record depreciation expense) Interest Expense Asset Retirement Obligation (To record interest expense) Debit 45620 Credit 456
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Flounder Corp. erected and placed into service an offshore oil platform on January 1, 2023, at a cost of $12 million.
Flounder is legally required to dismantle and remove the platform at the end of its ten-year useful life. Flounder
estimates that it will cost $1.2 million to dismantle and remove the platform at the end of its useful life and that the
discount rate to use should be 9%. Using (a) factor Table A.2, (b) a financial calculator, or (c) Excel function PV. Ignore
production related costs for this question.
Asset Retirement Obligation
(a)
Your answer is partially correct.
$506,892
Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related
expenses at December 31, 2023, assuming that Flounder follows IFRS. (Round answers to 0 decimal places,
e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not
indent manually. List all debit entries before credit entries. If no entry is required, select "No
Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Depreciation Expense
Accumulated Depreciation - Drilling Platform
(To record depreciation expense)
Interest Expense
Asset Retirement Obligation
(To record interest expense)
Debit
45620
Credit
456
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