During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paidthe construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1,2025. Because of technological change, Sheffield 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, Sheffield remediate the facility sothat it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400.Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirementobligations.(a)Your answer is partially correct.Prepare the journal entries to record the January 1, 2025, transactions. Use the Plant Assets account for the tanker depot. (Creditaccount titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" forthe account titles and enter O for the amounts. List all debit entries before credit entries. Round present value factor calculations to 5decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 5,125.)Account Titles and ExplanationPlant AssetsCash(To record payment to contractor)Plant AssetsAsset Retirement Obligation(To record asset retirement obligation)Debit5053000229115Credit50530000229115

Asset retirement obligation = Estimated cost of remediation after 10 years * PVF(9% for 10 years)…

Answered: ng 2024, Shereld constructed a small…

Business

Accounting

ng 2024, Shereld constructed a small manufacturing fa

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

During 2024, Sheffield constructed a small manufacturing facility specifically to manufacture one particular accessory. Sheffield paid
the construction contractor $5,053,000 cash (which was the total contract price) and placed the facility into service on January 1,
2025. Because of technological change, Sheffield 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, Sheffield remediate the facility so
that it can be used as a community center. Sheffield estimates the cost of remediation will be $542,400.
Sheffield uses straight-line depreciation with $0 salvage value for its plant asset and a 9% discount rate for asset retirement
obligations.
(a)
Your answer is partially correct.
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)
Debit
5053000
229115
Credit
5053000
0
229115

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