Feller Company purchased a site for a limestone quarry for $100,000 on January 2

Question

Feller Company purchased a site for a limestone quarry for $100,000 on January 2, 2013. It estimates that the quarry will yield 400,000 tons of limestone. It estimates that its retirement obligation has a fair value of $20,000, after which the land could be sold for $10,000. In 2013, 80,000 tons were quarried and 60,000 tons sold. Costs of production (excluding depletion) are $4 per ton.

Required:

Feller Company purchased a site for a limestone quarry for $100,000 on January 2, 2013. It estimates that the quarry will yield 400,000 tons of limestone. It estimates that its retirement obligation has a fair value of $20,000, after which the land could be sold for $10,000. In 2013, 80,000 tons were quarried and 60,000 tons sold. Costs of production (excluding depletion) are $4 per ton. Required: Compute the depletion cost per ton. Round to three decimal places. Compute the total cost of the inventory at December 31, 2013. Compute the total cost of goods sold for 2013.

Explanation / Answer

1. he depletion cost includes the original cost, plus the cleanup costs, less the residual value.

depletion cost per ton =(100,000+20000-10000)/400,000=0.275

2. Total cost = 0.275 +4 per ton = $4.275

3. total cost of the inventory= (80000-60000)*4.275=$85500

4. total cost of goods sold for 2013= (60000)*4.275=

$256500

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.