1 cember 1, 2019, an entity entered a commitment to purchase F00,000 barrels of aviation fuel for P55 per barrel on March 31, 2020. The entity entered this purchase commitment to protect itself against the volatility in the aviation fuel market. By December , 2019, the purchase price of aviation fuel had fallen to P50 per barrel. However, by March 31, 2020, when the entity took elivery of the 100,000 barrels the price of aviation fuel had cisen to P53 per barrel. What amount should be recognized as loss on purchase commitment in 2019? e fem re1os What amount should be recognized as gain on purchase commitment or 2020? What amount should be debited to purchase on March 31, 2020? 1000

1 cember 1, 2019, an entity entered a commitment to purchase F00,000 barrels of aviation fuel for P55 per barrel on March 31, 2020. The entity entered this purchase commitment to protect itself against the volatility in the aviation fuel market. By December , 2019, the purchase price of aviation fuel had fallen to P50 per barrel. However, by March 31, 2020, when the entity took elivery of the 100,000 barrels the price of aviation fuel had cisen to P53 per barrel. What amount should be recognized as loss on purchase commitment in 2019? e fem re1os What amount should be recognized as gain on purchase commitment or 2020? What amount should be debited to purchase on March 31, 2020? 1000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On October 1, 2021, Tyeso Company entered in a noncancellable purchase commitment to purchase inventory at P3,000 per unit. The 2,500 units of inventory will be delivered on February 28, 2022. On December 31,2021, the fair value of each inventory is at P2,850. On date of delivery, each unit of inventory is selling at P2,910. A. How much is the amount of liability on purchase commitment as of December 31, 2021? B. How much is the amount of inventory recorded on February 28, 2022? C. How much is the amount of gain or loss recognized on February 28, 2022?
7....Stellar Industries and Pearl Inc. enter into an agreement that requires Pearl Inc. to build three diesel-electric engines to Stellar’s specifications. Upon completion of the engines, Stellar has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $370,847 each January 1, starting January 1, 2020.Stellar’s incremental borrowing rate is 8%. The implicit interest rate used by Pearl and known to Stellar is 7%. The total cost of building the three engines is $2,362,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Stellar depreciates similar equipment on a straight-line basis. At the end of the lease, Stellar assumes title to the engines. Collectibility of the lease payments is probable. (b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of…
At December 31, 2021, ABC Company has an outstanding purchase commitment with contract purchase price of P 1,000,000 and the market value on this date is P 950,000 which is different from the expected market value of P 990,000. QUESTION: What is the amount of Loss on Purchase Commitment to be recorded at December 31, 2021?
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7...new...continue b Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build three diesel-electric engines to Sage’s specifications. Upon completion of the engines, Sage has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $405,443 each January 1, starting January 1, 2020.Sage’s incremental borrowing rate is 8%. The implicit interest rate used by Pronghorn and known to Sage is 7%. The total cost of building the three engines is $2,685,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Sage depreciates similar equipment on a straight-line basis. At the end of the lease, Sage assumes title to the engines. Collectibility of the lease payments is probable. (b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of…
On July 10, 2021, Johnson Corporation signed a purchase commitment to purchase inventory for $350,000 on or before February 15, 2022. The company's fiscal year-end is December 31. The contract was exercised on February 1, 2022, and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $359,000. The market price of the inventory on December 31, 2021, was $324,000. The company uses a perpetual inventory system. How much loss on purchase commitment will Johnson recognize in 2021? Multiple Choice $26,000 335.000
Euro Aviation signed a purchase commitment for jet fuel in Year 1 for in the amount of $10,000,000. The fuel is to be delivered in Year 2. At December 31, Year 1 the market value of the contract is $11.200,000 due to an increase in jet fuel prices. It is expected the gain will be realized in Year 2 as jet fuel is delivered. 1. Describe how Euro Aviation may account for this contract at the end of Year 1 under IFRS (Is there more than one option and specifically what are they)? 2. Describe how Euro Aviation may account for this contract at the end of Year 1 under US GAAP?
7..new.continue..c-d Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build three diesel-electric engines to Sage’s specifications. Upon completion of the engines, Sage has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $405,443 each January 1, starting January 1, 2020.Sage’s incremental borrowing rate is 8%. The implicit interest rate used by Pronghorn and known to Sage is 7%. The total cost of building the three engines is $2,685,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Sage depreciates similar equipment on a straight-line basis. At the end of the lease, Sage assumes title to the engines. Collectibility of the lease payments is probable. (c) Prepare the journal entry to record the transaction on January 1, 2020, on the books of…