Question

In 2017, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2018 for $700,000. Before the December 31, 2017 balance sheet date, the market price for these materials dropped to $510,000.
The journal entry to record this situation at December 31, 2017 will result in a credit that should be reported

Answer 1

Answer:

d) as a current liability

Explanation:

Current Liabilities are those liabilities which are payable within one years time e.g trade payable, tax payable etc.

The credit against the purchase of inventory is classified as the trade payable and it is paid in a short time, so it will be reported on the balance sheet in current liability section.