Accounting for Oil Rig Assets and Decommissioning Liabilities
| University | Harvard University ( HU) |
| Subject | Advanced financial accounting |
Accounting
| Journal Entry | Description | Debit (Dr) | Credit (Cr) | Explanation |
|---|---|---|---|---|
| J1 | Cost of constructing an oil rig | Oil Rig (Cost) ₹1,00,00,000 | Bank ₹1,00,00,000 | Increase in asset Oil Rig, Decrease in Bank |
| J2 | PV of dismantling | Oil Rig (Cost) ₹15,07,558 | Provision for dismantling ₹15,07,558 | Increase in asset Oil Rig, Increase in liability |
| J3 | Depreciation (Year 1) | Depreciation: Oil Rig ₹5,75,378 | Accumulated Depreciation ₹5,75,378 | Straight-line depreciation (20 years) |
| J4 | Unwinding discount (Year 1) | Finance costs PL ₹75,378 | Provision for dismantling ₹75,378 | Increase in provision, finance cost expense |
| J3 | Depreciation (Year 2) | Depreciation: Oil Rig ₹5,75,378 | Accumulated Depreciation ₹5,75,378 | Straight-line depreciation (20 years) |
| J4 | Unwinding discount (Year 2) | Finance costs PL ₹79,147 | Provision for dismantling ₹79,147 | Increase in provision, finance cost expense |
