ACC 304 All Assignments ACC 304 All Assignments | Page 120

42. The credit balance that arises when a net loss on a purchase
commitment is recognized should be
a. presented as a current liability.
b. subtracted from ending inventory.
c. presented as an appropriation of retained earnings.
d. presented in the income statement.
P43. In 2012, Orear Manufacturing signed a contract with a supplier
to purchase raw materials in 2013 for $700,000. Before the December
31, 2012 balance sheet date, the market price for these materials
dropped to $510,000. The journal entry to record this situation at
December 31, 2012 will result in a credit that should be reported
a. as a valuation account to Inventory on the balance sheet.
b. as a current liability.