A firm began a mineral exploitation venture during the current year by spending (1) $40 million for the mineral rights; (2) $100 million exploring for the minerals, one-fourth of which were successful; and (3) $60 million to develop the site. Management estimated that 20 million tons of ore would ultimately be removed from the property. Wages and other extraction costs for the current year amounted to $10 million. In total, 2 million tons of ore were removed from the deposit in the current year. The entire production for the period was sold. Compute cost of goods sold under the successful efforts method.

(A) $30 million
(B) $12.5 million
(C) $10 million
(D) $22.5 million

D) $22.5 Million

Step-by-step Explanation:

To calculate the cost of goods sold of minerals we first need to compute the depletion cost.

Formula:   × U

Where:

APV = Adjusted property Value.

TR = Total reserves.

U = Units extracted in a given period.

Data:

Putting values in the formula:

Depletion cost = × 2,000,000 = 12,500,000

CGS = (Depletion cost + wages and extraction costs)  

CGS = 12,500,000 + 10,000,000 = $22,500,000‬

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.