Question 1 Blossom Gas Co purchases a gas station and conven

Question 1 Blossom Gas Co. purchases a gas station and convenience store on January 1, 2017, at a cost of $770,000. Blossom expects to operate the store and gas station for 20 years. The company is legally required to remove the underground gas storage tanks from the facility at the end of its useful life. Blossom estimates that it will cost $106,000 to remove the tanks at the end of the fadility\'s useful ife. Prepare the journal entries to record the purchase of the gas station/convenience store, as well as the asset retirement obligation for the gas station/convenience store on January 1, 2017 Based on an effective interest rate of 8% the present value of the asset retirement obligation on January 1, 2017, $22,656. (1, no entry is required, select No Entry\" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record the depot) (To record the asset retirement obligation) Prepare any jourñal entries required for the depot and the asset retirement obligation at December 31, 2017. Blossom uses straight-line depreciation; the estimated salvage value when amount is entered. Do not indent manually,) No Entry\" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented

Solution

1. A) gas station a/c 770,000

To bank a/c. 770,000

B) profit and loss a/c. Dr. 22,656

To asset retirement obligation. 22,656

2.

Depreciation a/c. Dr. 385000

To gas station. 385000

B. Profit and loss a/c. Dr. 22,656

To asset retirement obligation. 22,656

C. Asset retirement obligation a/c dr 1812

To interest a/c. 1812

3. Asset retirement obligation a/c dr. 115000

To. Banka/c. 115000