Big Cat Exploration erected an oil platform in a remote area of Texas at a cost of $10 million. Bit Cat is legally required to dismantle and remove the platform at the end of its useful life, which is expected to be 10 years. Big Cat estimates that the cost of dismantling and removing the oil rig will be $700,000. Assume that the appropriate discount rate is 8%. Required: Prepare the journal entry to record the acquisition of the oil platform.

The $700,000 is an expense that will be incurred in 10 years from now. It howveer, needs to be accounted for in the present to show cost.

With a discount rate of 8% and 10 years as the period, the PV is,

= 700,000 / ( 1 + r) ¹⁰

= 700,000 / 1.08 ¹⁰

= 324,235.441659

= $324,235

Journal Entry becomes.

DR Oil Platform $10,324,235

CR Cash $10,000,000

CR Asset Retirement Obligation $324,235

(To record Oil Platform Acquisition)

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

his average speed in km per hour is ≈ 55.4 km/h and about 15.4 m/s.