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USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT THREE QUESTIONS: On January 1, 20x1, Wilson Corp. purchased timberlands at a cost of $500,000. Under the terms of the purchase agreement, once the timber has been cut and sold, it must restore the site to specified conditions at an estimated cost of $40,000. There is no residual value for the timberlands. Wilson estimates it will cut timber from the site for four (4) years before the site must be restored. It uses a 9% discount rate and rounds all calculations to the nearest whole dollar. 1. What journal entry should Wilson make on 1/1/X1 to record the asset retirement obligation? Debit Credit Item Account name A. 40,000 40,000 B. 28,337 Timberlands Asset Retirement Obligation Timberlands Asset Retirement Obligation Timberlands Note Payable 28,337 c. 40,000 40,000 D. 28,337 Timberlands Cash 28,337 2. The entry to record accretion expense on the asset retirement obligation (ARO) on 12/31/X1 should be: Item Account name Debit Credit A. 2,550 Timberlands Asset Retirement Obligation 2,550 B. 2,550 Accretion Expense Timberlands 2,550 vere c. Accretion Expense 2,550 Asset Retirement Obligation 2,550 D. Accretion Expense 2,550 Interest Payable 2,550 3. Assume the company estimates 4,000 trees are on the property, and during 20X1, 900 tre cut down and sold. What should be the cost of goods sold amount assigned to the trees? Round the depletion rate to the nearest whole dollar. A. $6,300 B. $127,800 C. $121,500 D. $112,500 E. $118,800

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