Problem:
At December 31, 2014, Indigo Girls Company has outstanding noncancelable purchase commitments for 40,150 gallons, at $3.15 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower.
Required:
Assuming that the market price as of December 31, 2014, is $2.10, record the journal entry?
Note: Please provide through step by step calculations.