Answer:
Unrealized holding Gain or Loss - Income (Dr.) $20,304
Estimated Liability on purchase commitments (Cr.) $20,304
Explanation:
Oriole Company has agreed to purchase Gallons of raw material for a defined price of $3.24 per gallon. The price is reduced on December 31, 2020. The Difference between the prices of gallons is recorded as unrealized gain on debit and liability is credited.
$3.24 - $2.70 = $0.54 * 37,600 Gallon = $20,304
Unrealized holding Gain or Loss - Income (Dr.) $20,304
Estimated Liability on purchase commitments (Cr.) $20,304
The raw material is purchased at the price of $2.70 per gallon and the 36,000 gallons are purchased. The journal entry to record this transaction is,
Raw material (Dr.) $76,896
Estimated liability on purchase commitments (Dr.) $20,304
Cash (Cr.) $97,200
