Question

Question 9 Wildhorse Mining Company purchased land on February 1, 2020, at a cost of $883,500. It estimated that a total of 51,300 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 $91,800. It believes it will be able to sell the property afterwards for $102,000. It incurred developmental costs of $204,000 before it was able to do any mining. In 2020, resources removed totaled 25,650 tons. The company sold 18,810 tons. Compute the following information for 2020. (a) Per unit mineral cost (b) Total material cost of December 31, 2020, inventory (c) Total material cost in cost of goods sold at December 31, 2020 Click if you would like to Show Work for this question: Open Show Work

Answer 1

Acquisition cost	883500
Add: Fair value of restoration obligation	91800
Add: Developmental costs	204000
Less: Salvage value	-102000
Depreciable cost	1077300
a
Depreciable cost	1077300
Divide by Total tons	51300
Per unit mineral cost	21
b
Units in inventory	6840	=25650-18810
X Per unit mineral cost	21
Total material cost of December 31,2020,inventory	143640
c
Units sold	18810
X Per unit mineral cost	21
Total material cost in cost of goods sold at December 31,2020	395010