Exercise 9-12 At December 31, 2017, Vaughn Company has outstanding noncancelable

Question

Exercise 9-12 At December 31, 2017, Vaughn Company has outstanding noncancelable purchase commitments for 36,500 gallons, at $3.84 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Assuming that the market price as of December 31, 2017, is $3.46, record the journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Round answers to 0 decimal places, e.g. 6,225.) Date Account Titles and Explanation Debit Dec. 31 SHOW LIST OF ACCOUNTS LINK TO TEXT

Explanation / Answer

Date                      account titles and explanation                                   debit                     credit

Dec 31.                 Raw materials                                                                    126290

                                Accounts payable                                                                                            126290

(36500*3.46) = 126290

Date                      account titles and explanation                                   debit                     credit

Jan 2018               Raw materials                                                                    126260

                                Estimated Liability on Purchase Commitments 13870

                                Accounts payable                                                                                            140160

(36500*3.84) - 140160

(36500*(3.84-3.46)) = 13870

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