Calaf's Drillers erects and places into service an offshore oil platform on 1st January, 2013, at a cost of $10,375,000. Calaf is legally needed to dismantle and remove the platform at the end of its useful life in 10 years. Calaf evaluates it will cost $1,037,500 to dismantle and remove the platform at the end of its practical life in 10 years. (The fair value at 1st January, 2013, of the dismantle and removal costs is $466,875).
Required:
Create the entry to record the asset retirement obligation. Use Oil Platform as an account title.
Foreman Company issued $ 800,000 of 10 percent, 20-year bonds on 1st January, 2013 at 102. Interest is payable semiannually on 1st July and 1st January. Foreman Company uses the effective interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705 percent.
Required:
Prepare the journal entries to record the subsequent:
a. The issuance of the bonds
b. The payment of interest and related amortization on 1st July, 2013.
c. The accrual of interest and the related amortization on 31st December, 2013.