During 2016, a Company Purchased a Mine at a Cost

question 11

Multiple Choice

During 2016, a company purchased a mine at a cost of $3,000,000. The company spent an additional $600,000 getting the mine ready for its intended use. It is estimated that 300,000 tons of mineral can be removed from the mine and the residual value of the mine will be $600,000. During 2016, 45,000 tons of mineral were removed from the mine and 35,000 tons were sold. Which of the following statements is incorrect with respect to the accounting for the mine?

• A)The book value of the mine on December 31, 2016 was $2,640,000.
• B)The book value of the mine decreased $450,000 during 2016.
• C)The inventory of minerals was $100,000 at December 31, 2016.
• D)The 2016 cost of goods sold was $350,000.

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Definitions:

Manufacturing Overhead

All manufacturing costs that are not directly assignable to specific products, including indirect materials, labor, and other indirect costs.

Milling Department

A specific department within a manufacturing facility where material, such as metal or grain, is ground or processed.

Manufacturing Overhead

Costs in the production process that are not directly tied to the product, such as salary of supervisors and rent of the factory.

Milling Department

A department within a manufacturing facility where raw materials are ground, crushed, or cut into small pieces using machines like mills.