In November 2018, the Brunswick Company signed two purchase commitments. The first commitment requires Brunswick to purc...
In November 2018, the Brunswick Company signed two purchase commitments. The first commitment requires Brunswick to purchase 25,000 units of inventory at $9 per unit by December 15, 2018. The second commitment requires the company to purchase 35,000 units of inventory at $10 per unit by March 15, 2019. Brunswick’s fiscal year-end is December 31. The company uses a periodic inventory system. Both contracts were exercised on their expiration date. Required: 1. Prepare the journal entry to record the December 15 purchase for cash assuming the following alternative unit market prices on that date: $9.60 $8.40 2. Prepare any necessary adjusting entry at December 31, 2018, for the second purchase commitment assuming the following alternative unit market prices on that date: $11.60 $9.40 3. Assuming that the unit market price on December 31, 2018, was $9.40, prepare the journal entry to record the purchase on March 15, 2019, assuming the following alternative unit market prices on that date: $10.60 $9.00
Homework Answers
| Date | General Journal | Debit | Credit | |
| 1a. | Dec.15 | Purchases (25,000 * $9) | $225,000 | |
| Cash | $225,000 | |||
| b | Dec.15 | Purchases (25,000 * $8.40) | $210,000 | |
| Loss on purchase commitment | $15,000 | |||
| Cash | $225,000 | |||
| 2a. | Dec.31 | No entry required | ||
| b | Estimated loss on purchase commitments(35,000* 0.6) | $21,000 | ||
| Estimated liability on purchase commitments | $21,000 | |||
| 3a | Mar.15 | Purchases (35,000 * $10) | $350,000 | |
| Cash | $350,000 | |||
| b | Mar.15 | Purchases (35,000 * $9) | $315,000 | |
| Loss on purchase commitment | $14,000 | |||
| Estimated liability on purchase commitments | $21,000 | |||
| Cash | $350,000 |
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