Question

0.6 Question 4 View Policies Show Attempt History Current Attempt in Progress . Your answer is partially correct. Kingbird Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2021 at a cost of $966,100. At December 31, 2020, the raw materials to be purchased have a market value of $921,000. In 2021, Kingbird paid $966,100 to obtain the raw materials which were worth $921,000. Prepare the entry to record the purchase. (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 O for the amounts.) Account Titles and Explanation Debit Credit Estimated Liability on Purchase Commitments

Answer 1

Prepare the journal entry to record the purchase as follows: Credit Journal Entry Accounts titles and explanation Unrealized holding gain or loss-income (purchase commitment) Estimated laibility on purcahse commitment (To record the unrealized gain or loss on purcahse commitment) Debit 45,100 45,100 Working note: Calculate the unrealized gain or loss as follows: Calculation of Unrealized holding gain or loss Cost of Raw Material Less: Market Value Unrealized loss 966100 921000 45100 Hence, the unrealized loss is $45.100.