CPA · Question 30 · Area II: Balance Sheet Accounts
A company constructs a nuclear plant. It is legally required to dismantle it after 20 years. <br/>Estimated remediation cost in 20 years: $10,000,000.<br/>Present value of that cost at construction date: $2,000,000.<br/><br/>What is the journal entry to record the Asset Retirement Obligation (ARO) at the start?
Answer options:
Debit Plant Asset $2,000,000; Credit ARO Liability $2,000,000
Debit Expense $2,000,000; Credit ARO Liability $2,000,000
Debit Plant Asset $10,000,000; Credit ARO Liability $10,000,000
No entry until retirement.
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