Question 1 Vaughn Mining Company purchased land on February 1, 2017, at a cost o

ID: 2581575 • Letter: Q

Question

Question 1 Vaughn Mining Company purchased land on February 1, 2017, at a cost of 914,200. It estimated that a total of 57,300 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 $109,800. It believes it will be able to sell the property afterwards for $122,000. It incurred developmental costs of $244,000 before it was able to do any mining. In 2017, resources removed totaled 28,650 tons. The company sold 21,010 tons. Compute the following information for 2017 (a) Per unit mineral cost (b) Total material cost of December 31, 2017, inventory (c) Total material cost in cost of goods sold at December 31, 2017 Question Attempts: 0 of 5 used SAVE FOR LATERSUBMET ANSWER

Explanation / Answer

(a)

Depletion Base

Particulars

Purchase price of Land

914200

Fair value of restoration

109800

Less: residual value

-122000

Developmental costs

244000

1146000

Tons available for mining

57300 tons

Depletion rate

Per unit Material cost

$20

(b)

Material cost of inventory for December 31,2017

(28650-21010)*$20

152800

(c )

Material cost in cost of goods sold

21010*20

420200

(a)