Prepare depreciation expense and interest expense

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Reference no: EM132519021

On January 1, 2020, Pina Colada Corporation erected a drilling platform at a cost of $5,350,800. Pina Colada is legally required to dismantle and remove the platform at the end of its 6 year useful life, at an estimated cost of $931,000. Pina Colada estimates that 70% of the cost of dismantling and removing the platform is caused by acquiring the asset itself, and that the remaining 30% of the cost is caused by using the platform in production. The present value of the increase in asset retirement obligation related to the production of oil in 2020 and 2021 was $31,681 and $34,216, respectively. The estimated residual value of the drilling platform is zero, and Pina Colada uses straight-line depreciation. Pina Colada prepares financial statements in accordance with IFRS.

Question 1: Prepare depreciation expense , Interest expense and production of oil industry journal entries required for the platform and the asset retirement obligation at December 31, 2020 and December 31, 2021?

Reference no: EM132519021

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