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b. disclosure is required only if prices have declined since the date
of the order.
c. disclosure is required only if prices have since risen substantially.
d. an appropriation of retained earnings is necessary.
42. The credit balance that arises when a net loss on a purchase
commitment is recognized should be
a. presented as a current liability.
b. subtracted from ending inventory.
c. presented as an appropriation of retained earnings.
d. presented in the income statement.
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.