Sunland Mining Company purchased land on February 1, 2020, at a cost of $975,900. It estimated that a total of 57,600 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 $110,700. It believes it will be able to sell the property afterwards for $123,000. It incurred developmental costs of $246,000 before it was able to do any mining. In 2020, resources removed totaled 28,800 tons. The company sold 21,120 tons.
Calculate :
a. Per unit mineral cost.
b. Total material cost of December 31, 2020, inventory
c. Total materials cost in cost of goods sold at December 31, 2014.
Answer:
a. Per unit mineral cost is $21
b. Total material Cost of ending inventory is $161280
c. Total materials cost in cost of goods sold is $443520
Step-by-step explanation:
The Per unit mineral cost can be computed as follows:
Details Amount ($)
Cost of land 975900
Add: Restoration obligation 110700
Add: Development cost <u> 246000 </u>
1332600
Less: Resale value of property <u> 123000</u>
Total cost of land 1209600
Divide:Total estimated cost 57600
of minerals
Per unit mineral cost 21
b. The ending inventory cost on December 31, 2020 can be calculated as follows:
Ending inventory = Total mined tons - sold tons
Ending inventory = 28800 - 21120
Ending inventory = 7680
Cost per ton= $21
Cost of ending inventory = 7680 × $21
Cost of ending inventory = $161280
c.To calculate the cost of goods sold in December 2020; we have:
Cost per ton = $21
Total units sold = 21120
Cost of goods sold = 21120 × $21
Cost of goods sold = $443520
