Notigi Mines Ltd. (Notigi) is a mining venture that recently began operations in northern Manitoba. The mine has been under development for the last two years and will produce its first shipments of refined metal before the end of the current fiscal year. Two senior executives who have extensive mining experience manage the mine. The mine is owned by a syndicate of 20 investors, mainly professionals such as accountants, doctors, lawyers, and dentists who live in various parts of western Canada.
Notigi extracts ore from the ground and ships it to another company for processing into refined metal. The processing company then returns the refined metal to Notigi for sale and shipment to buyers. Notigi has already entered into long-term contracts with several buyers to purchase virtually all of the mine's production at prices specified in the contract. Any production not covered by the long-term contracts can easily be sold at prevailing prices in the open market.

a. What do you think Notigi's objectives of accounting might be? Explain.
b. How would you rank the objectives? Explain.
c. When would you recommend that revenue be recognized on the sale of the refined metal? Explain your recommendation. Make sure that you consider the constraints, facts, and objectives in your answer.

  • CreatedFebruary 26, 2015
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