Purchase contracts
Not what you're looking for?
A company entered into the following material contracts at the beginning of the year:
Contract 1: The Company agreed to purchase 200,000 sprockets during the next 4 years at a price of $20 per sprocket. The contract is not cancellable. As of the end of the year, the market price for a sprocket was $22.
Contract 2: The Company entered into a contract that allows it to purchase up to 1,000,000 barrels of oil at $55/barrel. The spot price oil at the end of the year was $48/barrel. The contract specifies that to receive the price of $55/barrel the company must purchase at least 100,000 barrels in a single transaction. Should the company not purchase a lot of at least 100,000 barrels, the company will have to pay the current spot price.
Contract 3: A company has entered into a contract to purchase widgets. The contract provides that the company will purchase 50,000 widgets at a price of $45 each during the next 5 years. The contract is not cancellable. As of the end of the year, the market price for a widget was $43.
Instructions:
For each of the above contracts, prepare any necessary journal entries and notes to be included in the financial statements.
Purchase this Solution
Solution Summary
The solution explains the journal entries for given purchase contracts
Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.