Account for natural resources
Response to the following problem:
Central Atlantic Energy Company's balance sheet includes the asset Iron Ore. Central Atlantic Energy paid $2.75 million cash for the right to work a mine that contained an estimated 215,000 tons of ore. The company paid $67,000 to remove unwanted buildings from the land and $78,500 to prepare the surface for mining. Central Atlantic Energy also signed a $38,550 note payable to a landscaping company to return the land surface to its original condition after the lease ends. During the first year, Central Atlantic Energy removed 42,500 tons of ore, of which it sold 38,000 tons on account for $37 per ton. Operating expenses for the first year totaled $412,000, all paid in cash. In addition, the company accrued income tax at the tax rate of 35%.