Feller company purchased a site for a limestone quarry for $100,000 on January 2
ID: 2472312 • Letter: F
Question
Feller company purchased a site for a limestone quarry for $100,000 on January 2, 2016. is estimated that the quarry will yield 400,000 tons of limestone. it estimate that it's retirement obligation has a fair value of $20,000, after which the land could be sold for $10,000. in 2016, 80,000 tons were quarried and 60,000 tons sold. costs of production (excluding depletion ) are $4 per ton.
required:
1. compute the depletion cost per ron.. round to three decimal places.
2. compute the total cost of the inventory at December 31, 2016
3. compute the total cost of goods sold for 2016
Explanation / Answer
TOTAL COST OF THE SITE
1./
DEPLECTION COST PER TON
= $11000 / 400000 TONS
= $0.275 PER TON
2./
ENDING INVENTORY AT DECEMBER 31 2016
= 80000 - 60000
= 20000 TONS
COST OF THE INVENTORY
= 20000 * ($4 + $0.275)
= $85500
3./
COST OF GOODS SOLD FOR 2016
= 60000 * ($4 + $0.275)
= $256500
COST OF PURCHASE $100000 ADD- RETIREMENT OBLIGATION $20000 LESS- SALVAGE VALUE ($10000) TOTAL COST OF THE SITE $110000Related Questions
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