Alcide Mining Company purchased land on February 1, 2020, 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 2020, resources removed totaled 30,000 tons. The company sold 22,000 tons.

Compute the following information for 2020.

(a) Per unit mineral cost

$enter a dollar amount

(b) Total material cost of December 31, 2020, inventory

$enter a dollar amount

(c) Total material cost in cost of goods sold at December 31, 2020

$enter a dollar amount

Question

Business

Walter Salazar

3 November, 09:43

Alcide Mining Company purchased land on February 1, 2020, 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 2020, resources removed totaled 30,000 tons. The company sold 22,000 tons.

Compute the following information for 2020.

(a) Per unit mineral cost

$enter a dollar amount

(b) Total material cost of December 31, 2020, inventory

$enter a dollar amount

(c) Total material cost in cost of goods sold at December 31, 2020

$enter a dollar amount

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Answers (1)

Know the Answer?

Jamie Singh · Answer 1

(a) $23 per unit

(b) $184,000

(c) $506,000

Explanation:

(a) Per unit mineral cost:

= (Cost of land purchased + Fair value of restoration obligation + Cost of development - Selling value of property) : Tons of mineral available for mining

= (1,190,000 + 90,000 + 200,000 - 100,000) : 60,000

= $1,380,000 : 60,000

= $23 Per unit

(b) Total materials cost:

= (Resources removed - Resources sold) * Per unit mineral cost

= (30,000 tons - 22,000 tons) * $23

= 8,000 * $23

= $184,000

(c) Total materials cost in Cost of goods sold:

= Resources sold

= 22,000 tons * $23

= $506,000