Question

During 2019, Concord signed a noncancelable purchases commitments for 36,000 gallons at $3.00 per gallon of raw material to be used in manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower.

At December 31, 2019 the market price of the material dropped to $2.80 per gallon.

At December 31, 2020 the market price of the material dropped to $2.95 per gallon.

The material was received in March 3, 2021 and the market price was $3.02 per gallon.

Assume Concord uses the period inventory system.

Prepare the journal entries for a.) point when purchase commitment was signed, b.) 12/31/19, c.) 12/31/2020 and d.) 3/3/21

Answer 1

Answer:

A. There will be no entry for the purchasing contract because it is to be made prior to the delivery of the goods.

B, C & D: