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Blue Spruce Limited purchased an oil tanker depot on July 2, 2020, at a cost of $642,000 and expects to operate the depot for 10 years

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Blue Spruce Limited purchased an oil tanker depot on July 2, 2020, at a cost of $642,000 and expects to operate the depot for 10 years. After the 10 years, the company is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $80,250 to do this at the end of the depot’s useful life. Blue Spruce follows ASPE.

1-Calculate the present value of the asset retirement obligation (that is, its fair value) on the date of acquisition, based on an effective interest rate of 6%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.)

2-Prepare the journal entries to record the acquisition of the depot and the accrual for the asset retirement obligation for the depot on July 2, 2020. Use (1) factor Table A.2, (2) a financial calculator, or (3) Excel function PV in your calculations. (Hint: For a review of present value concepts, see Chapter 3 of Volume 1.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

3-Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Blue Spruce uses straight-line depreciation. The estimated residual value of the depot is zero. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)