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What is the journal entry required to record the asset

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Question - Sheffield Processes is involved with innovative approaches to finding energy reserves. Sheffield recently built a facility to extract natural gas at a cost of $12.1 million. However, Sheffield is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $15 million (the present value of which is $6.2 million). What is the journal entry required to record the asset retirement obligation?

a) No journal entry required.

b) Debit Natural Gas Facility for $2900000 and credit Asset Retirement Obligation for $2900000.

c) Debit Natural Gas Facility for $15000000 and credit Asset Retirement Obligation for $15000000.

d) Debit Natural Gas Facility for $6200000 and credit Asset Retirement Obligation for $6200000.

Reference no: EM132592452

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