At December 31, 2014, Indigo Girls Company has outstanding noncancelable purchase commitments for 43,920 gallons, at $4.35 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.
Assuming that the market price as of December 31, 2014, is $2.90, instead of $5.80, what journal entry should be made?
Dec. 31 Unrealized Holding Gain or Loss - Income 63684
Estimated Liability on Purchase Commitments 63684
Give the entry in January 2015, when the 43,920-gallon shipment is received, assuming that the situation given in (b2) above existed at December 31, 2014, and that the market price in January 2015 was $2.90 per gallon. Prepare the journal entry for when the materials are received in January 2015.
Raw Materials 127368
Estimated Liability on Purchase Commitments 63684
???? 191052
I chose "cash " but it is incorrect. These are the account titles listed.
Accounts Payable
Adjustment to Record Inventory at Cost
Allowance to Reduce Inventory to Market
Allowance to Reduce Inventory to NRV
Biological Assets - Shearing Sheep
Cash
Cost of Goods Sold
Estimated Liability on Purchase Commitments
Inventory
Inventory Over and Short
Loss Due to Decline of Inventory to NRV
Loss Due to Market Decline of Inventory
Notes Payable
Purchases
Raw Materials
Recovery of Loss Due to Market Decline of Inventory
Recovery of Loss Inventory
Salaries and Wages Expense
Sales Revenue
Unrealized Holding Gain or Loss - Equity
Unrealized Holding Gain or Loss - Income
Wool Inventory