XYZ signed a non-cancellable purchase agreement to buy one million gallons of je
ID: 2537876 • Letter: X
Question
XYZ signed a non-cancellable purchase agreement to buy one million gallons of jet fuel at a price of $4.60 per gallon for delivery the following summer.At the end of the year, the market price for jet fuel was $4.25. The required journal entry, if any, would include:
No journal entry is required.
Consider statements a, b and c below. If any one of these statements is NOT true about the gross profit method of inventory valuation, indicate it on the answer sheet. If a, b and c are all true statements, select answer d. If a, b and c are all false statements, select answer e.
credit Inventory $350,000Explanation / Answer
Answer 1. The Journal entry to be passed at the end of Year: Journal Entry S. No. Particulars Dr. Amt. Cr. Amt. a. Loss on Purchase Commitments 350,000.00 Purchase Commintments Liability 350,000.00 (Record the purchase commitment loss is recognized) Answer 2-a. The gross profit method may be used to estimate inventories for interim statements
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