Alcide Mining Company purchased land on February 1, 2014, at a cost of $1,190,00
ID: 2417251 • Letter: A
Question
Alcide Mining Company purchased land on February 1, 2014, at a cost of $1,190,000. It estimated that a total of 60,000 tons of mineral was available for mining. After it has removed all the natural resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the fair value of this restoration obligation at $90,000. It believes it will be able to sell the property afterwards for $100,000. It incurred developmental costs of $200,000 before it was able to do any mining. In 2014, resources removed totaled 30,000 tons. The company sold 22,000 tons.
Compute the following information for 2014.
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(a) Per unit mineral cost.
$
(b) Total material cost of December 31, 2014, inventory$
(c) Total materials cost in cost of goods sold at December 31, 2014.$
Explanation / Answer
Solution: Calculation of Per unit mineral cost.:
Land cost $1190000
Add: restoration obligation cost $90000
Less: Salvage value of a property $100000
Add: developmental costs $200000
Total Cost = $1380000
/
estimated total mineral 60000 tons
Per unit mineral cost. = $ 23
b). Total material cost of December 31, 2014, inventory:
Total material quantity of December 31, 2014, inventory = quantity of resources removed - quantity of mineral Sold
= 30000 - 22000 = 8000
Total material cost of December 31, 2014, inventory = Quantity of inventory * per unit mineral cost
=8000 * 23 = $ 184000
c). Total materials cost in cost of goods sold at December 31, 2014 =
Quantity of material sold * per unit mineral cost
= 22000 * 23 = $ 506000
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