Reference no: EM132941641

Problem 1: Your company manufactures plastic pails and uses raw liquid plastic in bulk form (which it stores in a single large tank) to make the pails. On December 31, 2019 the tank held 590 gallons of liquid plastic valued at $18,000. On January 28, 2020 it bought 10,000 gallons of raw liquid plastic for $300,000, and on September 12, 2020 it bought a further 12,000 gallons for $408,000. Note: all of these 2020 deliveries were stored in the aforementioned tank, and the company uses average costs to value inventory. On December 31st, 2020 there remained 19,000 gallons of raw liquid plastic left over in the tank. Given the above information what is the cost of raw liquid plastic that should be charged to the 2020 (Jan to Dec) Income Statement?

Option 1: $392,000

Option 2: $392.508

Option 3: $115,376

Option 4: $436,630