On December 31, 2019, Naysayer Company has outstanding purchase commitments for 10,000 gallons at P200 per gallon of raw materials to be used in the manufacturing process. Required : Prepare journal entry under each of the following assumptions: a. The market price on December 31, 2019 is P210. b. It is expected that the market price will decline to P170 in early January 2020. c. The market price on December 31 2019 is P170. d. The market price on December 31, 2019 is P170. On January 31, 2020 when the 10,000 gallon shipment is received, the market price is P150. e. The market price on December 31, 2019 is P170. On January 31, 2020 when the 10,000 gallon shipment is received, the market price is P210.

On December 31, 2019, Naysayer Company has outstanding purchase commitments for 10,000 gallons at P200 per gallon of raw materials to be used in the manufacturing process. Required : Prepare journal entry under each of the following assumptions: a. The market price on December 31, 2019 is P210. b. It is expected that the market price will decline to P170 in early January 2020. c. The market price on December 31 2019 is P170. d. The market price on December 31, 2019 is P170. On January 31, 2020 when the 10,000 gallon shipment is received, the market price is P150. e. The market price on December 31, 2019 is P170. On January 31, 2020 when the 10,000 gallon shipment is received, the market price is P210.

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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Question

On December 31, 2019, Naysayer Company has outstanding purchase commitments for 10,000 gallons
at P200 per gallon of raw materials to be used in the manufacturing process.
Required : Prepare journal entry under each of the following assumptions :
a. The market price on December 31, 2019 is P210.
b. It is expected that the market price will decline to P170 in early January 2020.
c. The market price on December 31 2019 is P170.
d. The market price on December 31, 2019 is P170. On January 31, 2020 when the 10,000 gallon
shipment is received, the market price is P150.
e. The market price on December 31, 2019 is P170. On January 31, 2020 when the 10,000 gallon
shipment is received, the market price is P210.

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