Grow It All Farms Ltd. is an agri-business that grows a variety of different grains on the land that it owns. Operations have been steadily expanding over the last few years. The company has now reached a point where it needs to create a reservoir for irrigation purposes. Management has applied to the municipality for permission to create the reservoir by creating a diversion from a creek that flows through land that the company owns. The permit has been approved on the condition that Grow It All Farms restore the land and creek to its natural state when operations cease. The company is required to provide the municipality with financial statements on an annual basis. Management agreed to the condition and has engaged an engineering firm to scope and price out the work. The cost to create the reservoir and divert the creek is $4,180,000. The cost of the restoration is estimated to be 56.180,000 in 20 years. Grow It All Farms borrows at an average rate of 6% from its lenders (a) Prepare the journal entries to set up the asset and the obligation imposed by the municipality (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 O decimal places, ea. 5.275)
Grow It All Farms Ltd. is an agri-business that grows a variety of different grains on the land that it owns. Operations have been steadily expanding over the last few years. The company has now reached a point where it needs to create a reservoir for irrigation purposes. Management has applied to the municipality for permission to create the reservoir by creating a diversion from a creek that flows through land that the company owns. The permit has been approved on the condition that Grow It All Farms restore the land and creek to its natural state when operations cease. The company is required to provide the municipality with financial statements on an annual basis. Management agreed to the condition and has engaged an engineering firm to scope and price out the work. The cost to create the reservoir and divert the creek is $4,180,000. The cost of the restoration is estimated to be 56.180,000 in 20 years. Grow It All Farms borrows at an average rate of 6% from its lenders (a) Prepare the journal entries to set up the asset and the obligation imposed by the municipality (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 O decimal places, ea. 5.275)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Grow It All Farms Ltd. is an agri-business that grows a variety of different grains on the land that it owns. Operations have been
steadily expanding over the last few years. The company has now reached a point where it needs to create a reservoir for irrigation
purposes. Management has applied to the municipality for permission to create the reservoir by creating a diversion from a creek that
flows through land that the company owns. The permit has been approved on the condition that Grow It All Farms restore the land
and creek to its natural state when operations cease. The company is required to provide the municipality with financial statements on
an annual basis.
Management agreed to the condition and has engaged an engineering firm to scope and price out the work. The cost to create the
reservoir and divert the creek is $4,180,000. The cost of the restoration is estimated to be $6.180.000 in 20 years. Grow It All Farms
borrows at an average rate of 6% from its lenders
(a)
Prepare the journal entries to set up the asset and the obligation imposed by the municipality. (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 O decimal places, eg. 5,275)
Account Titles and Explanation
(To record the creation of the reservoir)
(To record the restoration obligation)
Debit
Credit
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