Required:

Prepare journal entries using the Area of Interest method for FY2019, 2020, and 2021. Calculations should be rounded to the nearest dollar.

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Balmoral Mining Ltd. commenced gold mining operations in Northern Queensland on 1 July 2018. During the first year of exploration, Balmoral Mining Ltd. incurred the following costs (in millions of dollars) in relation to two Areas of Interest; these costs include a mining right lease for 15 years: Dawson Creek Orange Range Total Costs $16 million 28 million 44 million Early in 2020 gold was discovered at site Orange Range. At this time, exploration at the Dawson Creek site was not considered 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 2020, the company incurred development costs of $25 million in relation to fixed infrastructure and property, plant and equipment for the Orange Range site. On 1 July 2020, production commenced at the Orange Range site. It is estimated that the site contains 2,800,000 ounces of gold. The current sale price is $1,700 per ounce. Production to the 30 June 2021 extracted 230,000 ounces of gold incurring an incremental production cost of $800 per ounce. At the end of the financial year, 175,000 ounces of gold had been sold. Costs will be written off on a production basis. Balmoral Mining Ltd.'s financial year ends on 30 June. Balmoral Mining Ltd. commenced gold mining operations in Northern Queensland on 1 July 2018. During the first year of exploration, Balmoral Mining Ltd. incurred the following costs (in millions of dollars) in relation to two Areas of Interest; these costs include a mining right lease for 15 years: Dawson Creek Orange Range Total Costs $16 million 28 million 44 million Early in 2020 gold was discovered at site Orange Range. At this time, exploration at the Dawson Creek site was not considered 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 2020, the company incurred development costs of $25 million in relation to fixed infrastructure and property, plant and equipment for the Orange Range site. On 1 July 2020, production commenced at the Orange Range site. It is estimated that the site contains 2,800,000 ounces of gold. The current sale price is $1,700 per ounce. Production to the 30 June 2021 extracted 230,000 ounces of gold incurring an incremental production cost of $800 per ounce. At the end of the financial year, 175,000 ounces of gold had been sold. Costs will be written off on a production basis. Balmoral Mining Ltd.'s financial year ends on 30 June.

Answer rating: 100% (QA)

FY2019 Exploration Costs Dawson Creek 16 million x 65 104 million Orange Range 28 million x 65 182 m... View the full answer