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MONTACU MINING INVESTMENTS INC. <br />NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued <br />3. Sunrrnary ojSigniftcant Accounting Polkies: <br />(a) Consolidation <br />The Company proportionately consolidates its interest in the joint venture. All intercompany <br />transactions are eliminated. <br />(b) Mineral properties <br />Acquisition, exploration and development costs relating to mineral properties are deferred until <br />the properties- are put into commercial production, sold or abandoned. When a property is placed in <br />production, the related deferred costs are depleted using the units-of-production method, based on <br />periodic estimates of ore reserves of the producing property. Costs applicable to sold or abandoned <br />properties are charged against operations at the time of sale or abandonment of the property. <br />4. Inventories: <br />Inventories are stated at the lower of cos[ or market. Costs are transferred based on [he average cost per <br />unit transferred. Inventories at December 31, 1986 consist of: <br />Work in Process ..................................... $161,513 <br />Gold Bullion ........................................ 29,684 <br />Gold Dore ......................................... 23.967 <br />Materi;tls and Supplies ............................... 6.949 <br />$222,1 l3 <br />5. Miners( Properties: <br />Mineral properties at December 31, 1986 consist of: <br />Property acquisition costs ............................ $1,575,000 <br />Mine development costs ............................. 826,350 <br />2,401, 350 <br />Less accumulated depletion .......................... 29,881 <br />$2,371.469 <br />6. Income Tn.ies: <br />The Company's financial statements reflect no provision for income taxes at December 31, 1986 as a <br />result of operating losses for both tax and financial reporting purposes. Net tax operating loss carryforwards at <br />December 31, 1986 are approximately $900,000 and expire in 2001. <br />C-6 <br />