Ortman Enterprises sells a chemical used in various manufacturing processes. On January 1, 2011, Ortman had 5,000,000
Question:
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.
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen