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Calaf's Drillers erects and places into service an offshore oil platform on January 1, 2013, at a cost of $10,375,000. Calaf is legally required to dismantle and remove the platform at the end of its useful life in 10 years. Calaf estimates it will cost $1,037,500 to dismantle and remove the platform at the end of its useful life in 10 years. (The fair value at January 1, 2013, of the dismantle and removal costs is $466,875).

Required:

Prepare the entry to record the asset retirement obligation. Use Oil Platform as an account title.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M948615

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