Question

The store determined it will cost $95,800 to restore the area (considered a land improvement) surrounding one of its store parking lots, when the store is closed in 2 years. Marigold estimates the fair value of the obligation at December 31 is $82,000. Write down its journal entry.

Answer 1

Answer and Explanation:

The journal entry is shown below:

Parking Lot A/c Dr. $82,000

         To Asset Retirement Obligation A/c $82,000

(being the parking lot is recorded)

Here we debited the parking lot as it increased the assets and credited the asset retirement obligation as it also increased the liability

The amount i.e. to be recorded should be equivalent to the fair value of the obligation and the same is to be considered