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Prepare the journal entries to record the depot

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Question - Teal Company purchases an oil tanker depot on January 1, 2020, at a cost of $565,300. Teal expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $71,990 to dismantle the depot and remove the tanks at the end of the depot's useful life.

Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2020, is $40,198.

Reference no: EM132871859

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