Solution-Prepare the journal entry to record the acquisition

Prepare the journal entry to record the acquisition

Reference no: EM133127663

Question - On January 1, 2020, Ally Co., a publicly traded company, acquired an asset for $650,000,000. Ally spent an additional $35,000,000 to prepare the asset for the intended use and paid $10,000 for legal fees. The asset's retirement costs at the end of its useful life of 40 years are estimated to $180,000,000. The discount rate is 6%. The asset's residual value is $75,000,000 and the straight-line method is used for depreciation.

Required -

a) Prepare the journal entry to record the acquisition of the asset on January 1, 2020, assuming cash was paid for the asset's related costs.

b) Prepare all required adjusting entries on December 31, 2020, and December 31, 2021.

c) Assume that on January 1st, 2032, the asset's retirement costs are re-estimated to $200,000,000 and the new discount rate is 7%. Prepare the journal entry to record this change on January 1st, 2032.

d) Prepare required adjusting entries on December 31, 2032.

Reference no: EM133127663

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Prepare the journal entry to record the acquisition

Reference no: EM133127663

Reference no: EM133127663

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