XYZ Co. completed construction of a new silver mine in 2020. The cost of direct materials for the construction was $2,500,000 and direct labour was $2,300,000. In addition, the company allocated $280,000 of general overhead costs to the project. To finance the project, the company obtained a loan of $2,700,000 from its bank. The loan funds were drawn on February 24, 2020 and the mine was completed on November 24, 2020. The interest rate on the loan was 9% p.a. During construction, excess funds from the loan were invested and earned interest income of $24,000. The remainder of the funds needed for construction was drawn from internal cash reserves in the company. The company has also publicly made a commitment to clean up the site of the mine when the extraction operation is complete. It is estimated that the mining of this particular seam will be completed in 13 years, at which time restoration costs of $150,000 will be incurred. The appropriate discount rate for this type of expenditure is 5%. Determine the cost of the silver mine to be capitalized in 2020. Please make sure your final answer(s) are accurate to the nearest whole number. Total cost capitalized = $

XYZ Co. completed construction of a new silver mine in 2020. The cost of direct materials for the construction was $2,500,000 and direct labour was $2,300,000. In addition, the company allocated $280,000 of general overhead costs to the project. To finance the project, the company obtained a loan of $2,700,000 from its bank. The loan funds were drawn on February 24, 2020 and the mine was completed on November 24, 2020. The interest rate on the loan was 9% p.a. During construction, excess funds from the loan were invested and earned interest income of $24,000. The remainder of the funds needed for construction was drawn from internal cash reserves in the company. The company has also publicly made a commitment to clean up the site of the mine when the extraction operation is complete. It is estimated that the mining of this particular seam will be completed in 13 years, at which time restoration costs of $150,000 will be incurred. The appropriate discount rate for this type of expenditure is 5%. Determine the cost of the silver mine to be capitalized in 2020. Please make sure your final answer(s) are accurate to the nearest whole number. Total cost capitalized = $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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