Reference no: EM132610949

Question - In 2018, a firm incurred $600,000 of costs to establish the technological feasibility of a computer software product. The firm subsequently incurred $400,000 of costs for coding, testing, and preparing the final manual. In 2019, the product was marketed for sale with a 4-year sales life. In 2019, the product earned revenues of $200,000. Estimated revenues for the remaining years was $800,000. In 2020, the product earned revenues of $300,000. The estimated revenues for the remaining years were $200,000. In 2021, the product earned revenues of $150,000. The estimated revenue remaining was $50,000.

On January 1, 2020, Harris Pilton for Petroleum erected an oil platform and is legally required to dismantle and remove the platform at the end of its useful life, estimated to be 10 years. The company estimates the dismantling and removal will cost $7,000,000. Assume a 12% discount rate.

Instructions -

Compute the carrying value of the software product at December 31, 2020.

Compute the amount of the asset retirement obligation account at December 31, 2020.

Compute the amount of interest expense in relation to the asset retirement obligation at December 31, 2020.