P43. In 2012, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2013 for $ 700,000. Before the December 31, 2012 balance sheet date, the market price for these materials dropped to $ 510,000. The journal entry to record this situation at December 31, 2012 will result in a credit that should be reported
a. as a valuation account to Inventory on the balance sheet.
b. as a current liability.
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.