Cheyenne Company purchases an oil tanker depot on January 1, 2020, at a cost of $648,500....

Cheyenne Company purchases an oil tanker depot on January 1, 2020, at a cost of $648,500. Cheyenne 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 $79,920 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 $44,627.

Date	Account Titles and Explanation	Debit	Credit
January 1, 2020

	(To record the depot)
January 1, 2020

	(To record the asset retirement obligation)

Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Cheyenne uses straight-line depreciation; the estimated salvage value for the depot is zero.

Date	Account Titles and Explanation	Debit	Credit
December 31, 2020

	(To record depreciation for the depot)
December 31, 2020

	(To record depreciation on asset retirement obligation)
December 31, 2020

	(To record interest on asset retirement obligation)

On December 31, 2029, Cheyenne pays a demolition firm to dismantle the depot and remove the tanks at a price of $84,200. Prepare the journal entry for the settlement of the asset retirement obligation.

Date	Account Titles and Explanation	Debit	Credit
December 31, 2029

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Information concerning Cheyenne Corporation’s intangible assets is as follows. 1. On January 1, 2020, Cheyenne signed...

Information concerning Cheyenne Corporation’s intangible assets is as follows. 1. On January 1, 2020, Cheyenne signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $50,000. Of this amount, $10,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $10,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the...

During 2020, Cheyenne Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs...

During 2020, Cheyenne Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Cheyenne for a lump sum of $83,790 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below. Type No. of Chairs Estimated Selling Price Each Lounge chairs 560 $90 Armchairs 420 80 Straight chairs 980 50 During...

1. An oil tanker belonging to Oil Finders, Inc. runs aground and causes a massive oil...

1. An oil tanker belonging to Oil Finders, Inc. runs aground and causes a massive oil spill that damages several miles of the Texas coastline. As a result, several public beaches are rendered unusable to the public. Riker and Picard are avid surfers who like to hit the waves as often as they can. Because of the oil spill, they will not be able to surf for at least six months. They file suit against Oil Finders, Inc. for nuisance....

At January 1, 2020, the credit balance of Cheyenne Corp.’s Allowance for Doubtful Accounts was $406,500....

At January 1, 2020, the credit balance of Cheyenne Corp.’s Allowance for Doubtful Accounts was $406,500. During 2020, the bad debt expense entry was based on a percentage of net credit sales. Net sales for 2020 were $80 million, of which 89% were on account. Based on the information available at the time, the 2020 bad debt expense was estimated to be 0.80% of net credit sales. During 2020, uncollectible receivables amounting to $500,000 were written off against the allowance...

The Greek shipping company Ionia Management managed a 600-foot oil tanker that delivered oil to ports...

The Greek shipping company Ionia Management managed a 600-foot oil tanker that delivered oil to ports along the eastern seaboard of the United States. During these deliveries, Ionia's engine room crew, at the direction of their ship supervisors, regularly dumped oily waste into the ocean. To conceal the wrongdoing, the ship's crew falsified entries in its oil record book and lied to Coast Guard officials regarding the waste. The top executives and officials at Ionia did not know that employees...

On January 1, 2020, Blossom Company makes the two following acquisitions. 1. Purchases land having a...

On January 1, 2020, Blossom Company makes the two following acquisitions. 1. Purchases land having a fair value of $160,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $251,763. 2. Purchases equipment by issuing a 7%, 8-year promissory note having a maturity value of $270,000 (interest payable annually). The company has to pay 12% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Blossom Company for the two...

On January 1, 2020, Larkspur Company makes the two following acquisitions. 1. Purchases land having a...

On January 1, 2020, Larkspur Company makes the two following acquisitions. 1. Purchases land having a fair value of $320,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $485,782. 2. Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $360,000 (interest payable annually). The company has to pay 11% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Larkspur Company for the two...

On January 1, 2020, Oriole Company makes the two following acquisitions. 1. Purchases land having a...

On January 1, 2020, Oriole Company makes the two following acquisitions. 1. Purchases land having a fair value of $150,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $252,759. 2. Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $180,000 (interest payable annually). The company has to pay 11% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Oriole Company for the two...

On January 1, 2020, Shamrock Company makes the two following acquisitions. 1. Purchases land having a...

On January 1, 2020, Shamrock Company makes the two following acquisitions. 1. Purchases land having a fair value of $330,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $483,153. 2. Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $380,000 (interest payable annually). The company has to pay 10% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Shamrock Company for the two...

On January 1, 2020, M Company makes the two following acquisitions. 1. Purchases land having a...

On January 1, 2020, M Company makes the two following acquisitions. 1. Purchases land having a fair value of $290,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $467,048. 2. Purchases equipment by issuing a 7%, 9-year promissory note having a maturity value of $450,000 (interest payable annually). The company has to pay 10% interest for funds from its bank. (a) Record the two journal entries that should be recorded by M Company for the two...

Subjects