Question

Ortman Enterprises sells a chemical used in various manufacturing processes. On January 1, 2011, Ortman had 5,000,000 gallons on hand, for which it had paid $0.50 per gallon. During 2011, Ortman made the following purchases:
During 2011, Ortman sold 65,000,000 gallons at $0.75 per gallon (35,000,000 gallons were sold on June 29 and 30,000,000 gallons were sold on Nov. 22), leaving an ending inventory of 7,000,000 gallons. Assume that Ortman uses a perpetual inventory system. Ortman uses the lower of cost or market for its inventories, as required by generally accepted accounting principles.
Required:
1. Assume that the market value of the chemical is $0.76 per gallon on December 31, 2011.
Compute the cost of ending inventory using the FIFO, LIFO, and average cost methods and then apply LCM. (Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)
2. Assume that the market value of the chemical is $0.58 per gallon on December 31, 2011.
Compute the cost of ending inventory using the FIFO, LIFO, and average cost methods and then apply LCM.


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  • CreatedSeptember 22, 2015
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