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Signed a long-term noncancellable purchase commitment with its primary supplier. Jeremiah agreed to purchase $2.5 million of raw materials during the...
Signed a long-term noncancellable purchase commitment with its primary supplier. Jeremiah agreed to purchase $2.5 million of raw materials during the next fiscal year under this contract. At the end of the current fiscal year, the raw material to be purchased under this contract had a market value of $2.3 million. What is the journal entry at the end of the current fiscal year? A. Debit Unrealized Loss for $200,000 and credit Estimated Liability on Purchase Commitment for $200,000. B. Debit Estimated liability on Purchase Commitment for $200,000 and credit Unrealized Gain for $200,000. C. Debit Unrealized Loss for $2,300,000 and credit Estimated Liability on Purchase Commitment for $2,300,000. D. No journal entry is required.
