(Purchase Commitments) Prater Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term noncancelable purchase commitment with its largest supplier of this raw material on November 30, 2013, at an agreed price of $400,000. At December 31, 2013, the raw material had declined in price to $375,000.
Instructions
What entry would you make on December 31, 2013, to recognize these facts?