Question

On January 1, 2016, Barbosa Company purchased a coal mining site for $1,000,000. Under the terms of the purchase agreement, Barbosa must restore the site to specified conditions at an estimated cost of $125,000. Barbosa estimates that it will be able to operate the site for 20 years. Barbosa uses a 6% discount rate and a straight-line method of depreciation.

	Required:
1.	Prepare the journal entry necessary to record the purchase of the coal mining site.
2.	Prepare any journal entries needed at December 31 with regard to this mining site.
3.	Next Level What is the conceptual justification that underlies the accounting for an asset retirement obligation?

Chart of Accounts

CHART OF ACCOUNTS
Barbosa Company
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 188 Coal Mine 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable 299 Asset Retirement Obligation EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 531 Depreciation Expense 532 Bad Debt Expense 533 Accretion Expense 559 Miscellaneous Expenses

General Journal

Shaded cells have feedback.

Prepare the journal entry necessary to record the purchase of the coal mining site on January 1. Round to the nearest dollar.

How does grading work?

PAGE 14

GENERAL JOURNAL

Score: 22/37

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1		✔
2
3

Points:

4.16 / 7

Feedback

Check My Work

Prepare the journal entries on December 31 to record year-end adjustments related to the coal mine. Round to the nearest dollar.

How does grading work?

PAGE 14

GENERAL JOURNAL

Score: 17/51

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4		✔

Points:

3.33 / 10

Answer 1

Answer