The journal entry to record the purchase of the raw materials by Sheffield Company is as follows:
Debit Purchases $1,031,600
Credit Accounts Payable $1,031,600
- To record the purchase of the raw materials in 2021.
The December adjusting entry can be revised with:
Debit Estimated Liability $53,300
Credit Unrealized holding Loss $53,300
- To reverse the December 31 adjusting entry.
<h3>What is an unrealized holding loss?</h3>
In this instance, the unrealized holding loss arose from the fact that the market value of the raw materials is less than the purchase amount because of the noncancelable commitment.
Thus, the unrealized holding loss arose as the difference between the market value and the purchase amount.
<h3>Data Analysis:</h3>
Purchases $1,031,600 Accounts Payable $1,031,600
Estimated Liability $53,300 Unrealized holding Loss $53,300
Thus, the entry to record the purchase is a debit to the purchases account and a credit to accounts payable.
Learn more about recording purchases at brainly.com/question/24179237
