Question

Blue Mining Company purchased land on February 1, 2020, at a cost of $1,169,500. It estimated that a total of 52,800 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 $96,300. It believes it will be able to sell the property afterwards for $107,000. It incurred developmental costs of $214,000 before it was able to do any mining. In 2020, resources removed totaled 26,400 tons. The company sold 19,360 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

Answer 1

a
Cost of Land	1169500
Add: Fair value of this restoration obligation	96300
Add: Developmental costs	214000
Less: Property tax	-107000
Cost for Depletion	1372800
Divide by Tons of mineral	52800
Per unit mineral cost	26
b
Units in ending inventory	7040	=26400-19360
X Per unit mineral cost	26
Total material cost of December 31, 2020, inventory	183040
c
Units sold	19360
X Per unit mineral cost	26
Total material cost in cost of goods sold at December 31, 2020	503360