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At December 31, 2020, Splish Company has outstanding noncancelable purchase commitments for 36,500 gallons, at $3.84 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.

At December 31, 2020, Splish Company has outstanding noncancelable purchase commitments for 36,500 gallons, at $3.84 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.

FINANCIAL ACCOUNTING
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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At December 31, 2020, Splish Company has outstanding noncancelable purchase commitments for 36,500 gallons, at $3.84 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.
Transcribed Image Text:At December 31, 2020, Splish Company has outstanding noncancelable purchase commitments for 36,500 gallons, at $3.84 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.
(c2) Give the entry in January 2021, when the 36,500-gallon shipment is received, assuming that the situation given in (b2) above existed at December 31, 2020, and that the market price in January 2021 was $3.46 per gallon. Prepare the journal entry for when the materials are received in January 2021. (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. Round answers to 0 decimal places, e.g. 6,225.) Date Account Titles and Explanation Jan. 2021 Debit Credit
Transcribed Image Text:(c2) Give the entry in January 2021, when the 36,500-gallon shipment is received, assuming that the situation given in (b2) above existed at December 31, 2020, and that the market price in January 2021 was $3.46 per gallon. Prepare the journal entry for when the materials are received in January 2021. (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. Round answers to 0 decimal places, e.g. 6,225.) Date Account Titles and Explanation Jan. 2021 Debit Credit
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