Pronghorn Mining Company purchased land on February 1, 2020, at a cost of $996,100. It estimated...

Pronghorn Mining Company purchased land on February 1, 2020, at a cost of $996,100. It estimated that a total of 51,900 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 $93,600. It believes it will be able to sell the property afterwards for $104,000. It incurred developmental costs of $208,000 before it was able to do any mining. In 2020, resources removed totaled 25,950 tons. The company sold 19,030 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

Expert Solution

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Pronghorn Mining Company

Calculation of cost of investment	Amount $
Cost of land	996,100.00
Fair value of restoration obligation	93,600.00
Developmental costs	208,000.00
Less: Sale value	(104,000.00)
Cost of investment	1,193,700.00

Answer a
Cost of investment	1,193,700.00
Estimated total tons of mineral	51,900.00
Per unit mineral cost	23.00

Answer b
Resources removed in 2020	25,950.00
Resources sold in 2020	19,030.00
Inventory as on December 31, 2020	6,920.00
Per unit mineral cost	23.00
Total material cost of December 31, 2020, inventory	159,160.00

Answer c
Resources sold in 2020	19,030.00
Per unit mineral cost	23.00
Total material cost in cost of goods sold at December 31, 2020	437,690.00

ekkarill92 answered 1 year ago

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