[Anonymous]

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

The amount is $264,000, computed as follows:

Total obligation $257,000

Add: undiscounted cash flow 68,000*

Accretion expense 26,000

Deduct: payment (87,000)

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$264,000

* The original undiscounted cash flow of $110,000 should be adjusted to the discounted estimate.

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The answer explanation has 68,000 as “undiscounted cash flow” when it is the discounted cash flow. Is that an error?

[Iggy1985]

yeah i think it should just say add discounted cash flow 68,000

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[Anonymous]

Gotcha. Thanks man.

[Author]

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