1. desalinates and bottles sea water. The desalinated water is in high demand from a large group of environmentally conscious people on the west coast of Canada. During March, WOW processes 1,000 litres of sea water and obtains 1,600 litres of drinking water and 85 kilograms of sea salt (the rest of the sea water evaporates in the desalinization process). Processing the 1,600 litres of water costs WOW $2300 WOW sells 1120 litres of the desalinated water in 2-litre containers for $10 per container. In addition, WOW sells 75 kilograms of sea salt for $1.70 per kilogram. Due to the relatively small proportion of sea salt, WOW has decided to treat it as a byproduct.

Required

1. Assuming WOW accounts for the byproduct using the production method, what is the inventoriable cost for each product and WOW's gross margin. And the gross margin percentages
2. Assuming WOW accounts for the byproduct using the sales method, what is the inventoriable cost for each product and WOW's gross margin?
3. Discuss the difference between the two methods of accounting for byproducts.
4. What are the inventory amounts reported in the statement of financial position on March 31, for drinking water and sea salt under each of the two methods of byproduct accounting cited in requirement1?