Brief Exercise 9-7 Crane Company signed a long-term noncancelable purchase commi

Question

Brief Exercise 9-7 Crane Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2018 at a cost of $966,100. At December 31, 2018, the raw materials to be purchased have a market value of $921,000. Prepare any necessary December 31, 2018 entry. (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.) Date Account Titles and Explanation Debit Credit Dec. 31

Explanation / Answer

Answer:-Journal entry :-

Date             Accounts Titles and explanation                           Debit                         Credit        

  

Dec.31   Purchases                                                                   $921000

              Estimated Liability on Purchase Commitments           $45100

                       Cash                                                                                                 $966100

             (Being purchases are made)

Dec.31 Unrealized holding gain or Loss-Income                     $45100

                    Estimated Liability on Purchase Commitments                                   $45100

              (Being adjustment entry made)

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