ACC 304 All Assignments ACC 304 All Assignments | Page 121

c. as an appropriation of retained earnings.
d. on the income statement.
44. At the end of the fiscal year, Apha Airlines has an outstanding
non-cancellable purchase commitment for the purchase of 1 million
gallons of jet fuel at a price of $4.10 per gallon for delivery during the
coming summer. The company prices its inventory at the lower of cost
or market. If the market price for jet fuel at the end of the year is $4.50,
how would this situation be reflected in the annual financial
statements?
a. Record unrealized gains of $400,000 and disclose the existence of
the purchase commitment.
b. No impact.
c. Record unrealized losses of $400,000 and disclose the existence of
the purchase commitment.