Asset retirement obligation

Question 1

Computation of ARO

JE of PPE with an ARO

Answer 1

present value of obligation

PPE (PV of ARO + cost)
ARO
Cash

Question 2

JE for yearly accretion expense

Answer 2

Accretion expense - IS
ARO

Present value of ARO X interest rate

Question 3

Computation of depreciation of assets with ARO

Answer 3

ARO - compute by straight line
PPE - compute separately if a different method is used

Depreciation expense - ARO
Depreciation expense - PPE
Acc. Depreciation

Question 4

Upon retirement - JE

Answer 4

ARO
Loss on ARO
Cash/Payable (actual amt paid)
Gain on asset retirement (if applicable)