Ayayai Company signed a long-term noncancelable purchase commitment with a major

Question

Ayayai Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2018 at a cost of $967,800. At December 31, 2017, the raw materials to be purchased have a market value of $917,200. In 2018, Ayayai paid $967,800 to obtain the raw materials which were worth $917,200. Prepare the entry to record the purchase. (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 0 for the amounts.) Account Titles and Explanation Debit Credit

Explanation / Answer

Journal Entry is :

Trading A/c. Dr. 967800

To Cash / Creditor A/c. 967800

No matter the market worth of the raw material , the value should be treated at which it is purchased

In the credit if goods purchased in cash or it is creditor

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