Posted: July 9th, 2016

What amount should Marquart report as a liability for stamp redemptions at December 31, 2010?

a). Prepare the journal entries to record the depot (considered a plant asset) and the asset retirement obligation for the depot on 1/1/12. Based on an effective-interest rate of 6%, the fair value of the asset retirement obligation on 1/1/12, is $39,087.

b). Prepare the journal entries required for the depot and asset retirement obligation at 12/31/12. Bassinger uses straight-lime depreciation; the estimated residual value for the depot is 0.

c). On 12/31/12. Bassinger pays a demolition firm to dismantle the depot and remove the tanks at a price of $80,000. Prepare the journal entry for the settlement of the asset retirement obligation.


1. Marquart Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Marquart’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Marquart’s liability for stamp redemptions was $13,000,000 at December 31, 2009. Additional information for 2010 is as follows:

-Stamp service revenue from stamps sold to licenses $9,500,000
-Cost of redemptions (stamps sold prior to 1/1/12) $6,000,000

If all the stamps sold in 2010 were presented for redemption in 2011, the redemption cost would be $5,200,000. What amount should Marquart report as a liability for stamp redemptions at December 31, 2010?

2. In packages of its products, Wiseman Inc. includes coupons that may be presented at retail stores to obtain discounts on other Wiseman products. Retailers are reimbursed for the face amount of coupons redeemed plus 10% of that amount for handling costs. Wiseman honors requests for coupon redemption by retailers up to 3 months after the consumer expiration date. Wiseman estimates that 60% of all coupons issued will ultimately be redeemed. Information relating to coupons issued by Wiseman during 2010 is as follows:

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