Use the following informa tion for problems #49-50. On December 4, 20X8, DoCo en

Question

Use the following informa tion for problems #49-50. On December 4, 20X8, DoCo enters into a contractual agreement to take ivery on January 25, 20X9 of 10,000 pounds of nuts at a cost of $2.20 del per pound. On December 31, 20X8, DoCo finds that the market price of the nuts has declined to $1.90 per pound, and management decides that the decline is permanent. 49. DoCo should show these developments on its 20X8 financial statements a. a $22,000 liability b. a $19,000 liability c. a $3,000 liability d. no liability When DoCo takes delivery on January 25, 20X9, the market price of nuts is $1.75 per pound. As a result, DoCo should 50. a. debit Inventory $17,500 b. debit Inventory $22,000 c. debit Loss $4,500 d. debit Retained Earnings $3,000

Explanation / Answer

Q 49 : c. a liability of $ 3,000. ($2.2 -$1.9 ) * 10,000 Q 50. c. debit a loss of $ 4,500 ($1.75 - $2.2) *10,000 Q 47. a. make no entry, but disclose the loss in an accompanying note Q 48. c. make no entry, but disclose the loss/gain in the note.

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