Novak Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2021 at a cost of $911,500. At December 31, 2021, the raw materials to be purchased have a market value of $863,400. Prepare any necessary December 31, 2021 entry. (Credit account titles are automatically indented when 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.)

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Business

Darwin Hood

13 October, 02:42

Novak Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2021 at a cost of $911,500. At December 31, 2021, the raw materials to be purchased have a market value of $863,400. Prepare any necessary December 31, 2021 entry. (Credit account titles are automatically indented when 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.)

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Answers (1)

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Clay Lambert · Answer 1

Dr Unrealized Holding Loss-Income (Purchase Commitments) $48,100

Cr Estimated Liability on Purchase Commitments $48,100

Explanation:

Novak Company Journal entries

Dr Unrealized Holding Loss-Income (Purchase Commitments) $48,100

Cr Estimated Liability on Purchase Commitments $48,100

($911,500 - $863,400)