Chapter 13, Problem 13.11BE

Asset Retirement Obligation at Acquisition. On January 1, Pollison Energy Group, Inc. acquired an oil processing plant at a total cost of $13,560,000 and paid cash. The estimated cost to dismantle the plant and restore the property at the end of the plant’s 10-year life is $2,100,000. Pollison’s cost of capital is 5%. Pollison depreciates the asset over its useful life by using the straight-line method with no salvage value Prepare the journal entries required to record the acquisition of the plant asset.