Exercise 11-22 Pronghorn Mining Company purchased land on February 1, 2017, at a
ID: 2585512 • Letter: E
Question
Exercise 11-22 Pronghorn Mining Company purchased land on February 1, 2017, 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 2017, resources removed totaled 27,000 tons. The company sold 19,800 tons Compute the following information for 2017. (a) Per unit mineral cost (b) Total material cost of December 31, 2017, inventory (c) Total material cost in cost of goods sold at December 31, 2017 LINK TO TEXTExplanation / Answer
Answer to Part a)
Depletion Cost = $1,031,100 + $99,900 + $222,000 - $111,000
Depletion Cost = $1,242,000
Per Unit Mineral Cost = 1,242,000 / 54,000
Per Unit Mineral Cost = $23
Answer to Part b)
Material Remaining on December 31, 2017 = 27,000 tons - 19,800 tons
Material Remaining on December 31, 2017 = 7,200 tons
Total Material Cost of December 31, 2017 Inventory = 7,200 * $23
Total Material Cost of December 31, 2017 Inventory = $165,600
Answer to Part c)
Units sold = 19,800 tons
Total Material Cost in Cost of Goods sold at December 31, 2017 = 19,800 * $23
Total Material Cost in Cost of Goods sold at December 31, 2017 = $455,400
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