Oil Products Company purchases an oil tanker depot on January 1, 2020, at a cost of $600,000. Oil Products 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 $75,000 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 (considered a plant asset) and the asset retirement obligation for the depot on January 1, 2017, Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2017, is $41,879.
(If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)