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Topic: Asset Retirement Obligation ?

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iheartpeter
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Posted: April 26 2010 at 10:13am \| IP Logged

I just went through the section in the Lease chapter on Asset Retirement Obligation (FASB 143)... I didn't see anything on this in Wiley 2010, but it is outlined in my Becker 2008 book. Is this really even relevant or tested? It kinda went over my head so I'm not sure if I should really study it.

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divyagovil1
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Posted: April 28 2010 at 8:28am \| IP Logged

I never came across any mcqs on ARO in my FAR exam, if I can recall correctly.

However, if you need more understanding on ARO, you can refer following two links:

1. Overview on ARO:-

http://www.journalofaccountancy.com/Issues/2001/Dec/Accounti ngForAssetRetirementObligations.htm

2. Question from Becker passmaster:

http://www.cpanet.com/cpa_forum/forum_posts.asp?TID=22835&am p;PN=0&TPN=1

Hope it's helpful !

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cflas08
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Posted: April 28 2010 at 12:04pm \| IP Logged

iheartpeter wrote:

I just went through the section in the Lease chapter on Asset Retirement Obligation (FASB 143)... I didn't see anything on this in Wiley 2010, but it is outlined in my Becker 2008 book. Is this really even relevant or tested? It kinda went over my head so I'm not sure if I should really study it.

It is discussed in Gleim as well. And this is why I use Gleim along with Wiley.

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venchlu
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Posted: May 17 2010 at 3:21pm \| IP Logged

Can someone tell me if I am correct?

Finch Co. reported a total asset retirement obligation of $257,000 in last year's financial statements. This

year, Finch acquired assets subject to unconditional retirement obligations measured at undiscounted

cash flow estimates of $110,000 and discounted cash flow estimates of $68,000. Finch paid $87,000

toward the settlement of previously recorded asset retirement obligations and recorded an accretion

expense of $26,000. What amount should Finch report for the asset retirement obligation in this year's

balance sheet?

a. $238,000

b. $264,000

c. $280,000

d. $306,000

Explanation

Choice "b" is correct.

I am trying to make JEs for this question-

The end of last year- Co. reported a total asset retirement obligation of $257,000 in last year's financial statements.

Dr. ARO Asset 257,000

Cr. ARO liability 257,000

This year- Finch acquired assets subject to unconditional retirement obligations measured at undiscounted cash flow estimates of $110,000 and discounted cash flow estimates of $68,000

Dr. ARO asset 68,000

Cr. ARO liability 68,000

This year- Finch paid $87,000 toward the settlement of previously recorded asset retirement obligations

Dr. ARO liability 87,000

Cr. Cash 87,000

This year- Finch also recorded an accretion expense of $26,000.

Dr. Accretion Exp 26,000

Cr. ARO liability 26,000

So ARO liability= 257,000 + 68,000- 87,000 + 26,000= $264,000ŕ Answer B..

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venchlu
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Posted: May 18 2010 at 4:00pm \| IP Logged

nobody else can confirm my JEs? Well, i guess it is not popular topic on the exam...i mean asset retirement obligation!!

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venchlu
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Posted: May 18 2010 at 4:02pm \| IP Logged

by the way, the question is from 2010 AICPA released questions...i am a bit freak out when i saw it ...i thought it is not a important topic at all...or i can say..it is released by AICPA...probably means that we won't see it in the real exam...just my thoughts.

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