Question

Martinez Mining Company purchased land on February 1, 2020, at a cost of $1,031,100. It estimated that a total of 54,000 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 $99,900. It believes it will be able to sell the property afterwards for $111,000. It incurred developmental costs of $222,000 before it was able to do any mining. In 2020, resources removed totaled 27,000 tons. The company sold 19,800 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

Answer 1

a
Cost of Land	1031100
Add: Fair value of restoration obligation	99900
Add: Developmental costs	222000
Less: Salvage value	-111000
Depreciable cost	1242000
Divide by Total tons	54000
Per unit mineral cost	23
b
Units in ending inventory	7200	=27000-19800
X Per unit mineral cost	23
Total material cost of December 31, 2020, inventory	165600
c
Units sold	19800
X Per unit mineral cost	23
Total material cost in cost of goods sold at December 31, 2020	455400