Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related expenses at December 31, 2023, assuming that Bramble follows IFRS. (Round answers to 0 decimal places, e.g. 5,275. Credit accoun
Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related expenses at December 31, 2023, assuming that Bramble follows IFRS. (Round answers to 0 decimal places, e.g. 5,275. Credit accoun
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Topic Video
Question
6
Transcribed Image Text:Bramble Corp. erected and placed into service an offshore oil platform on January 1, 2023, at a cost of $9 million. Bramble is legally
required to dismantle and remove the platform at the end of its seven-year useful life. Bramble estimates that it will cost $0.9 million
to dismantle and remove the platform at the end of its useful life and that the discount rate to use should be 6%. 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.
Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related expenses at
December 31, 2023, assuming that Bramble 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
$598,554
Accumulated Depreciation - Drilling Platform
(To record depreciation expense)
Interest Expense
Asset Retirement Obligation
(To record interest expense)
Debit
35913
Credit
10
35913
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