The information below relates to barrels of oil held in the inventory of Olsens Ltd during 2015.
Question:
The information below relates to barrels of oil held in the inventory of Olsen’s Ltd during 2015.
Owing to an oil glut, the net realisable value for a barrel of the same grade of oil was $40 per barrel on 31 December 2015. In 2016, the company disposed of the 15 000 barrels of oil in the ending inventory for $600 000. No additional purchases were made in 2016. Olsen’s Ltd uses a periodic inventory system and the average cost flow method. Ignore GST.
Required
Complete the partial income statements for 2015 and 2016 shown below under the average cost flow method and the lower of cost and net realisable value rule.
Step by Step Answer:
Financial Accounting
ISBN: 9781118608203
9th Edition
Authors: John Hoggett, Lew Edwards, John Medlin, Keryn Chalmers, Jodie Maxfield, Andreas Hellmann, Claire Beattie