Gladstone Distributors Inc.entered into a non-cancellable contract to buy 40,000 litres of linseed oil for $6 per litre for resale purposes.Gladstone intends to resell the oil to retail paint outlets for $10 per litre.The contract was entered into on October 31,2016 for delivery on January 15,2017.Gladstone's year-end is December 31.On December 12,2016,Gladstone's supplier reduces the price to $5.10 per litre due to adverse market conditions.
Requirements:
a.Outline the required accounting treatment assuming that Gladstone expects it can sell the oil for $6.45 per litre.
b.Outline the required accounting treatment assuming that Gladstone expects it can sell the oil for $5.55 per litre.

Question

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The Answer of Gladstone Distributors Inc.entered into a non-cancellable contract to buy 40,000 litres of linseed oil for $6 per litre for resale purposes.Gladstone intends to resell the oil to retail paint outlets for $10 per litre.The contract was entered into on October 31,2016 for delivery on January 15,2017.Gladstone's year-end is December 31.On December 12,2016,Gladstone's supplier reduces the price to $5.10 per litre due to adverse market conditions.
Requirements:
a.Outline the required accounting treatment assuming that Gladstone expects it can sell the oil for $6.45 per litre.
b.Outline the required accounting treatment assuming that Gladstone expects it can sell the oil for $5.55 per litre.