Alien Ltd commenced previous metal mining operations in Western Australia on 1 July 2016. During the first year of exploration it incurred the following costs (in millions of dollars) in relation to 3 areas: Sun 20 Moon 18 Star 24 Total Costs 52 In 2018 uranium was discovered at site Star. Explorations continued at site Sun, however exploration at site Moon was not considered to be economically viable and was abandoned. In relation to exploratory expenditure 35% relates to intangibles and the remainder to property, plant and equipment. Up until 30 June 2018, the company incurred development costs of $2 million in relation to infrastructure and property, plant and equipment for site Star. Costs will be written off on a production basis. A further $1.5 million in exploration and evaluation costs were incurred at site Sun. On 1 July 2018 production commenced at site Star. It is estimated that the site contains 80,000 tonnes of uranium. The current sale price is $3,500 per tonne. Production to the 30 June 2019 extracted 6,500 tonnes of uranium incurring a production cost of $3 million. At the end of the financial year 5,000 tonnes of uranium had been sold. Management also decided that exploration at site Sun was no longer viable and abandoned work at this site. Alien Ltd’s financial year ends on 30 June. Required: Prepare journal entries using the area of interest method for 2017, 2018 and 2019. Calculations should be rounded to the nearest dollar.
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Alien Ltd commenced previous metal mining operations in Western Australia on 1 July 2016. During the first year of exploration it incurred the following costs (in millions of dollars) in relation to 3 areas: Sun 20 Moon 18 Star 24 Total Costs 52 In 2018 uranium was discovered at site Star. Explorations continued at site Sun, however exploration at site Moon was not considered to be economically viable and was abandoned. In relation to exploratory expenditure 35% relates to intangibles and the remainder to property, plant and equipment. Up until 30 June 2018, the company incurred development costs of $2 million in relation to infrastructure and property, plant and equipment for site Star. Costs will be written off on a production basis. A further $1.5 million in exploration and evaluation costs were incurred at site Sun. On 1 July 2018 production commenced at site Star. It is estimated that the site contains 80,000 tonnes of uranium. The current sale price is $3,500 per tonne. Production to the 30 June 2019 extracted 6,500 tonnes of uranium incurring a production cost of $3 million. At the end of the financial year 5,000 tonnes of uranium had been sold. Management also decided that exploration at site Sun was no longer viable and abandoned work at this site. Alien Ltd’s financial year ends on 30 June. Required: Prepare
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