On October 6, 2018, the Elgin Corporation signed a purchase commitment to purchase inventory for $60,000on or before March 31, 2019. The company’s fiscal year-end is December 31. The contract was exercised onMarch 21, 2019, and the inventory was purchased for cash at the contract price. On the purchase date of March21, the market price of the inventory was $54,000. The market price of the inventory on December 31, 2018, was$56,000. The company uses a perpetual inventory system.Required:1. Prepare the necessary adjusting journal entry (if any is required) on December 31, 2018.2. Prepare the journal entry to record the purchase on March 21, 2019
On October 6, 2018, the Elgin Corporation signed a purchase commitment to purchase inventory for $60,000on or before March 31, 2019. The company’s fiscal year-end is December 31. The contract was exercised onMarch 21, 2019, and the inventory was purchased for cash at the contract price. On the purchase date of March21, the market price of the inventory was $54,000. The market price of the inventory on December 31, 2018, was$56,000. The company uses a perpetual inventory system.Required:1. Prepare the necessary adjusting journal entry (if any is required) on December 31, 2018.2. Prepare the journal entry to record the purchase on March 21, 2019
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On October 6, 2018, the Elgin Corporation signed a purchase commitment to purchase inventory for $60,000
on or before March 31, 2019. The company’s fiscal year-end is December 31. The contract was exercised on
March 21, 2019, and the inventory was purchased for cash at the contract price. On the purchase date of March
21, the market price of the inventory was $54,000. The market price of the inventory on December 31, 2018, was
$56,000. The company uses a perpetual inventory system.
Required:
1. Prepare the necessary
2. Prepare the journal entry to record the purchase on March 21, 2019
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