Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 13.3P
a.
To determine
To prepare: The journal for recording investment in the offshore oil platform.
b.
To determine
To prepare: The journal for recording depreciation and accretion accrual for the first year.
c.
To determine
To prepare: The Journal entries for recording disposal of the asset and the settlement of the asset retirement obligation.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Xtra Processes is involved with innovative approaches to finding energy
reserves. Xtra recently built a facility to extract natural gas at a cost of $12
million. However, Xtra is also legally responsible to remove the facility at the
end of its useful life of twenty years. This cost is estimated to be $17 million
(the present value of which is $6.5 million). What is the journal entry
required to record the asset retirement obligation?
O Debit Natural Gas Facility for $17,000,000 and credit Asset Retirement Obligation
for $17,000,000
O Debit Natural Gas Facility for $5,000,000 and credit Asset Retirement Obligation
for $5,000,000
O Debit Natural Gas Facility for $6,500,000 and credit Asset Retirement Obligation
for $6,500,000
O No journal entry required
Annual depreciation expense on a building purchased a few years ago (using the straight-line method) is $4,800. The cost of the building was $96,000. The current book value of the equipment (January 1, 2021) is $81,600. At the time of purchase, the asset was estimated to have a zero salvage value. On January 1, 2021, the company decided to reduce the original useful life by 25% and to establish a salvage value of $4,800. The firm also decided double-declining-balance depreciation was more appropriate. Ignore tax effects.
1. Prepare the journal entry, if any, to report the accounting change under GAAP.
2. Record the annual depreciation for 2021.
Assume that Brown's Salvage Company paid $30,000 for equipment with a 10-year life and zero expected residual value. After using the equipment for four years, the company determines that the
asset will remain useful for only three more years.
Read the requirements.
Requirement 1. Record depreciation expense on the equipment for year 5 by the straight-line method.
First, select the formula to calculate the company's revised depreciation expense on the equipment for year 5. Then enter the amounts and calculate the depreciation for year 5. (Enter "0" for items
with a zero value.)
Date
Record the depreciation on the equipment for year 5. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
Accounts and Explanation
Requirement 2. What is accumulated depreciation at the end of year 5?
The accumulated depreciation at the end of year 5 is $
=
Debit
Revised
depreciation
Credit
Chapter 13 Solutions
Intermediate Accounting (2nd Edition)
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - Prob. 13.3QCh. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.1MCCh. 13 - Prob. 13.2MCCh. 13 - Prob. 13.3MCCh. 13 - Medical Services Inc allows employees at the end...Ch. 13 - Trade Notes Payables. On February 1, Seville...Ch. 13 - Unearned Revenues. On June 1 of the current year,...Ch. 13 - Unearned Revenues. GoSnow Inc. provides snow...Ch. 13 - Prob. 13.4BECh. 13 - Prob. 13.5BECh. 13 - Prob. 13.6BECh. 13 - Sales Taxes Payable. Kloth Fabric Store operates...Ch. 13 - Prob. 13.8BECh. 13 - Prob. 13.9BECh. 13 - Prob. 13.10BECh. 13 - Asset Retirement Obligation at Acquisition. On...Ch. 13 - Prob. 13.12BECh. 13 - Asset Retirement Obligation, Disposal. Buckner...Ch. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Warranty Liability, Assurance-Type Warranty,...Ch. 13 - Prob. 13.19BECh. 13 - Prob. 13.20BECh. 13 - Trade Notes Payable. On November 1, Barcelona...Ch. 13 - Unearned Revenues. On May 1 of the current year,...Ch. 13 - Gift Cards. Diamond Depot sold 57,000 of gift...Ch. 13 - Sales Taxes Payable. Eaton Technology operates...Ch. 13 - Prob. 13.5ECh. 13 - Asset Retirement Obligation. On January 1,...Ch. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Accounting for Premiums. Supergreen Grocers, Inc....Ch. 13 - Prob. 13.13ECh. 13 - Payroll Taxes Payable, Pay Exceeds. Wage Base....Ch. 13 - Current Operating Liabilities. James Stores, Inc....Ch. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Payroll Taxes Payable. Jackson Corporation employs...Ch. 13 - Prob. 1JCCh. 13 - Prob. 2JCCh. 13 - Prob. 3JCCh. 13 - Financial Statement Analysis Case You are...Ch. 13 - Surfing the Standards Case 1: Environmental...Ch. 13 - Prob. 2SSCCh. 13 - Prob. 1BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Annual depreciation expense on a building purchased a few years ago (using the straight-line method) is $4,300. The cost of the building was $86,000. The current book value of the equipment (January 1, 2018) is $73,100. At the time of purchase, the asset was estimated to have a zero salvage value. On January 1, 2018, the company decided to reduce the original useful life by 25% and to establish a salvage value of $4,300. The firm also decided double-declining-balance depreciation was more appropriate. Ignore tax effects. Required:1. Prepare the journal entry, if any, to report the accounting change under GAAP.2. Record the annual depreciation for 2018.arrow_forwardOn January 1, 2020, Cullumber Corp. acquired a machine at a cost of $1020000. It is to be depreciated on the straight-line method over a 5-year period with no residual value. Because of a bookkeeping error, no depreciation was recognized in Cullumber's 2020 financial statements. The oversight was discovered during the preparation of Cullumber's 2021 financial statements. Depreciation expense on this machine for 2021 should be $255000. $204000. $408000. $0.arrow_forwardHadley Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $290,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Hadley on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission. Required: Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report, indicate whether the equipment should be leased or sold. Differential Analysis Prepare a differential analysis report, dated June 15. Use a minus sign to indicate costs or a negative impact on income. Below the report,…arrow_forward
- A company purchased a piece of equipment for $120,000 and estimated that the asset will have no salvage value t the end of its 15-year useful life. At the end of Year 5 of ownership, when accumulated depreciation was $40,000 and the asset's book value was $80,000, the company revised the asset's estimated useful life to a total of 10 years. What is the appropriate accounting treatment beginning with Year 6? O The equipment will depreciate $40,000 over the next 10 years. O The equipment will depreciate $80,000 over the next 10 years. O The equipment will depreciate $40,000 over the next five years. O The equipment will depreciate $80,000 over the next five years.arrow_forwardOn January 1, Year 1, Lowing Company acquired a patent from Generics Research Corporation for $3 million. The legal life of the patent is 20 years, but Lowing expects to use it for 5 years. Pawson Company has committed to purchase the patent from Lowing for $500,000 at the end of that 5-year period. Lowing uses the straight-line method to amortize intangible assets with finite useful lives. What is the amount of amortization expense each year?arrow_forwardFour years ago on January 2, Titus purchased a long-lived asset. The purchase price of the asset was 250,000, with no salvage value. The estimated useful life of the asset was 10 years. Titus used the straight-line method to calculate depreciation expense. An impairment loss on the asset of 30,000 was recognized on December 31 of the current year. The estimated useful life of the asset at December 31 of the current year did not change. What amount should it report as depreciation expense in its income statement for the next year?arrow_forward
- Al Hamd drillers erects and places into service an off-shore oil platform on January1, 2018, at a Cost of $ 15000000. Al Hamd is legally required to dismantle and remove the platform at the end of its usefull life in 10 years. The company estimates it will cost $ 1500000 to dismantle and remove the platform at the end of its useful life in 10 years (the fair value at January 1 2018 of the dismantle and removing cost is $ 650000). Prepare the entry to record the environmental liability.arrow_forwardSimpson Company applies revaluation accounting to plant assets with a carrying value of P800,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of P750,000. How much is the amount of revaluation surplus when the asset is revalued?arrow_forwardARON Corp. acquired a machine at a total cost of P5,200,000. The estimated life of the machine is 8 years or a total of 100,000 working hours with no salvage value. The operating machine totaled: 2020, 5,000 hours; 2021, 12,000 hours. If the working hours method is used, the depreciation for the year 2021 isarrow_forward
- Assume that XYZ catering services paid $144,000 for equipment with a16 -year life and zero expected residual value. After using the equipment for six years, the company determines that the asset will remain useful for only five more years. Record depreciation expense on the equipment for year 7 by the straight-line method. First, select the formula to calculate the company's revised depreciation expense on the equipment for year 7. Then enter the amounts and calculate the depreciation for year 7.(Enter "0" for items with a zero value.) Revised ( Book value - Residual value ) / Revised useful life remaining = depreciationarrow_forwardAt the beginning of the year, Big Time Tires acquired a patent for $730,000, and a trademark for $260,000. Big Time Tire's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. What is the total amount of amortization expense that would appear in Big Time Tire's income statement for the first year related to these items? Amortization expensearrow_forwardOn January 1, 2025, Sunland Corp, acquired a machine at a cost of $960000. It is to be depreciated on the straight-line method over a 5-year period with no residual value. Because of a bookkeeping error, no depreciation was recognized in Sunland's 2025 financial statements. The oversight was discovered during the preparation of Sunland's 2026 financial statements. Depreciation expense on this machine for 2026 should be O $384000. O $192000. O $240000. © $0.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education