In March 2021, the Phillips Tool Company signed two purchase commitments. The first commitment requires Phillips...
In March 2021, the Phillips Tool Company signed two purchase
commitments. The first commitment requires Phillips to purchase
inventory for $116,000 by June 15, 2021. The second commitment
requires the company to purchase inventory for $166,000 by August
20, 2021. The company's fiscal year-end is June 30. Phillips uses a
periodic inventory system.
The first commitment is exercised on June 15, 2021, when the market
price of the inventory purchased was $93,000. The second commitment
was exercised on August 20, 2021, when the market price of the
inventory purchased was $128,000.
Required:
Prepare the journal entries required on June 15, June 30, and
August 20, 2021, to account for the two purchase commitments.
Assume that the market price of the inventory related to the
outstanding purchase commitment was $146,400 at June 30.
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