Company S signs several purchase contracts in 2022. Under the terms of one contract, Company S will take delivery of the inventory,sold on account, in 2023 and pay a price of $629,000 to Company R. The fair value of the inventory at the company's December 31,2022 year end declines to $529,000. Company S does not expect to be able to recover its additional costs. Assume that the fair valueremains at $529,000 until the goods are delivered.Is this an onerous contract in 2022? If so, why? Show journal entries for 2022 and 2023. (Credit account titles are automatically indentedwhen the 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.List all debit entries before credit entries.)Account Titles2022Loss on Purchase ContractsLiability for Onerous Contracts2023DebitCredit

Journal Entries2022Account TitlesDebitCreditLoss on Purchase Contracts $100,000 Liability for…

Answered: Company S signs several purchase…

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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In March 2021, the Phillips Tool Company signed two purchase commitments. The first commitment requires Phillips to purchase inventory for $100,000 by June 15, 2021. The second commitment requires the company to purchase inventory for $150,000 by August 20, 2021. The company’s fiscal year-end is June 30. Phillips uses a periodic inventory system. The first commitment is exercised on June 15, 2021, when the market price of the inventory purchased was $85,000. The second commitment was exercised on August 20, 2021, when the market price of the inventory purchased was $120,000. Required:Prepare the journal entries required on June 15, June 30, and August 20, 2021, to account for the two purchase commitments. Assume that the market price of the inventory related to the outstanding purchase commitment was $140,000 at June 30.
At December 31, 2020, Shamrock, Ic., a manufacturer, has outstanding noncancelable purchase commitments for 63,000 pounds of raw material to be used in its manufacturing process. The purchase commitments require Shamrock, Inc. to pay $14 per pound for the raw material. The company prices its raw material inventory at cost or market, whichever is lower. (a2) Assuming that the market price as of December 31, 2020, is $10.00, record the journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31
On March 10, 2020, Pharoah Company sold to Barr Hardware 180 tool sets at a price of $51 each (cost $29 per set) with terms of n/60, f.o.b. shipping point. Pharoah allows Barr to return any unused tool sets within 60 days of purchase. Pharoah estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2020, Barr returned 6 tool sets and received a credit to its account. (a) Prepare journal entries for Pharoah to record (1) the sale on March 10, 2020, (2) the return on March 25, 2020, and (3) any adjusting entries required on March 31, 2020 (when Pharoah prepares financial statements). Pharoah believes the original estimate of returns is correct. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Your answer is correct. No.…
On January 1, 2017, Purdy Company enters into a contract to transfer Blue and Rain to Georgia Co. for $300,000. The contract specifies that payment for Blue will not occur until Rain is also delivered. In other words, payment will not occur until both Blue and Rain are transferred to Georgia. Purdy determines that standalone prices are $110,000 for Blue and $190,000 for Rain. Purdy delivers Blue to Georgia on February 10, 2017. On March 15, 2017, Purdy delivers Rain to Georgia. Purdy should record
On December 31. 2021. Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost Rhone-Metro $365,760 and has an expected useful life of six years. Its normal sales, price is $365,760. The lessee-guaranteed residual value at December 31, 2025, is $25,000. Equal payments  under the lease are $ 100,000 and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation or amortization. Required: Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025, assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,500.
On March 10, 2020, Pharoah Company sold to Barr Hardware 180 tool sets at a price of $51 each (cost $29 per set) with terms of n/60, f.o.b. shipping point. Pharoah allows Barr to return any unused tool sets within 60 days of purchase. Pharoah estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2020, Barr returned 6 tool sets and received a credit to its account. (a) Prepare journal entries for Pharoah to record (1) the sale on March 10, 2020, (2) the return on March 25, 2020, and (3) any adjusting entries required on March 31, 2020 (when Pharoah prepares financial statements). Pharoah believes the original estimate of returns is correct. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) No. Account Titles and…
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At December 31, 2020, Ashley Co. has outstanding purchase commitments for 150,000 gallons, at $6.20 per gallon, of a 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, 2020, is $5.90, how would you treat this situation in the accounts?
Vaibhav
Ivanhoe Company sells goods that cost $250,000 to Bridgeport Company for $400,000 on January 2, 2020. The sales price includes an installation fee, which is valued at $41,000. The fair value of the goods is $369,000. The goods were delivered on March 1, 2020. Installation is considered a separate performance obligation and was completed on June 18, 2020. Under the terms of the contract, Bridgeport Company pays Ivanhoe $261,000 upon delivery of the goods and the balance at the completion of the installation. Using the five-step process for revenue recognition, determine when and how much revenue would be recognized by Ivanhoe. Assume IFRS is followed. (Round percentage allocations to 2 decimal places, 15.25 and final answers to 0 decimal places, e.g. 5,275.) Performance Obligation When? How much? Deliver goods choose a transaction date January 2, 2020March 1, 2020June 18, 2020 $enter a…
On January 1, 2021, MARCOS Company entered into a contract for the construction of a building at an original price of P2,000,000 to be completed on June 30, 2023 subject to penalty of P500,000 on the year it becomes virtually certain that construction will not be completed on the date agreed upon. On January 1, 2022, the contract price increased by P2,500,000 due to the change in the design of the building requested by the customer. 12/31/2021 12/31/2022 12/31/2023 Cumulative costs incurred as of the end of the year 600,000 900,000 3,075,000 1,025,000 3,780,000 420,000 Estimated remaining cost to complete at the end of the year What is the realized gross profit (loss) to be recognized by MARCOS Company for the year ended December 31, 2023 if the outcome of construction can be estimated reliably?
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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