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In January 2018, Deep Sea Oil Inc. builds and begins operating an oil drilling platform in...

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Accounting

In January 2018, Deep Sea Oil Inc. builds and begins operatingan oil drilling platform in the Gulf of Mexico. The company expectsto operate the platform for 9 years and will be required to removethe platform at the end of 9 years at an expected cost of$25,000,000. Assuming that the discount rate is 8%.

a. Prepare the journal entry to record the asset retirementobligation (ARO) in January 2018

b. Prepare the journal entry to record the annual depreciationin 2018 and adjustment to the ARO.

c. Prepare the amortization schedule for the ARO.

d. Assume that at the end of 9 years, it costs the company$24,889,000 to remove the platform. Prepare the entry (assumepayment is in cash).

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