Tra Processes Is Involved with Innovative Approaches to Finding Energy

Multiple Choice

tra Processes is involved with innovative approaches to finding energy reserves. Xtra recently built a facility to extract natural gas at a cost of $15 million. However, Xtra is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $21 million (the present value of which is $8 million) . What is the journal entry required to record the asset retirement obligation?

A) No journal entry required.
B) Debit Natural Gas Facility for $21,000,000 and credit Asset Retirement Obligation for $21,000,000
C) Debit Natural Gas Facility for $6,000,000 and credit Asset Retirement Obligation for $6,000,000.
D) Debit Natural Gas Facility for $8,000,000 and credit Asset Retirement Obligation for $8,000,000.