Barrick Gold Corporation, with headquarters in Toronto, Canada, is the worldâs most profitable and largest gold mining company outside South Africa. Part of the key to Barrickâs success has been due to its ability to maintain cash flow while improving production and increasing its reserves of gold-containing property.
During 2005, Barrick achieved record growth in cash flow, production, and reserves. The company maintains an aggressive policy of developing previously identified, but undeveloped, target areas that have the possibility of a large amount of gold ore. Barrick limits the riskiness of this development by choosing only properties that are located in politically stable regions and by the companyâs use of internally generated funds, rather than debt, to finance growth. Barrickâs inventories are as follows.
(a) Why do you think that there are no finished goods inventories? Why do you think the raw material, ore in stockpiles, is considered both a current and a noncurrent asset?
(b) Consider that Barrick has no finished goods inventories. What journal entries would it make to record a sale?
(c) Suppose that gold bullion that cost $1.8 million to produce was sold for $2.4 million. The journal entry was made to record the sale, but no entry was made to remove the gold from the gold-in-process inventory. How would this error affect thefollowing?