**Problem Context**On June 1, Year 1, Charley Horse Company entered into a contract with Good Feed Company to purchase 1,000 bales of organic hay on January 30, Year 2, at a price of $30 per bale. The hay was intended to feed Charley Horse’s herd of bison. However, on December 1, Year 1, Charley Horse sold its herd, resulting in no need for the hay. The company is unable to sell the hay to a third party but can cancel the contract with Good Feed for a cancellation fee of $20,000.**Required Task**Determine the accounting entries, if any, Charley Horse Company should record on December 31, Year 1, concerning the contract for hay purchase scheduled on January 30, Year 2.

The given question relates to IAS 37 for recognizing provision for cancellation of contract. As per…

Answered: On June 1, Year 1, Charley Horse…

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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