Barrick Gold Corporation, with headquarters inToronto, Canada, is the world's most profitable and largest goldmining company outside South Africa. Part of the key to Barrick'ssuccess has been due to its ability to maintain cash flow whileimproving production and increasing its reserves of gold-containingproperty.
During 2004, Barrick achieved record growth in cash flow,production, and reserves.
The company maintains an aggressive policy of developingpreviously identified target areas that have the possibility of alarge amount of gold ore, and that have not been previouslydeveloped. Barrick limits the riskiness of this development bychoosing only properties that are located in politically stableregions, and
by the company's use of internally generated funds, rather thandebt, to finance growth.
Barrick's inventories are as follows:
Inventories (in millions, US dollars)
Gold inprocess $133
Mine operating supplies 82
Non-current (included in Other assets)
Ore in stockpiles $65
(a) Why do you think that there are no finishedgoods inventories? Why do you think the raw material, ore instockpiles, is considered to be a non-current asset?
(b) Consider that Barrick has no finished goodsinventories. What journal entries are made to record a sale?
(c) Suppose that gold bullion that cost $1.8million to produce was sold for $2.4 million. The journal entry wasmade to record the sale, but no entry was made to remove the goldfrom the gold in process inventory. How would this error affect thefollowing?
Balance Sheet IncomeStatement
Inventory ? Cost ofgoods sold ?
Retained earnings ? Net income ?
Accounts payable ?
Working capital ?
Current ratio ?