The Frank Company entered into a noncancelable fixed price purchase obligation on July 20, 2006,...
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Accounting
The Frank Company entered into a noncancelable fixed price purchase obligation on July 20, 2006, to purchase 3,000 assemblies at $6.30 per assembly to be delivered on March 2, 2007. On December 31, 2006, the replacement cost of the assembly was determined to be $5.80 per assembly. Which of the following adjusting journal entries would be correct as of December 31, 2006, to account for the price change?
a.
Inventory (or Purchases) 17,400
Loss on Purchase Commitments 1,500
Accounts Payable 18,900
b.
Loss on Purchase Commitments 1,500
Inventory (or Purchases) 1,500
c.
Loss on Purchase Commitments 1,500
Accrued Loss on Purchase Commitments 1,500
d.
Accounts Payable 1,800
Inventory (or Purchases) 1,800
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