Answer:
Journal entries
Date Account title and explanation PR. No. Debit ($) Credit ($)
June 15,2021 Purchases $85,500
Loss on purchase commitment $15,000
Cash $100,000
(To record the payment for the loss on
purchase commitment)
June 30,2021 Estimated loss on purchase
commitment $10,600
Estimated liability on purchase
commitment $10,600
(To record the loss on purchase commitment)
Aug 30,2021 Purchases $120,500
Loss on purchase commitment $19,900
Estimated liability on purchase
commitment $10,600
Cash $151,000
(To record the payment for the loss on purchase commitment)
Explanation:
For June 15, Loss on purchase commitment = Signed value of inventory - Market value of inventory = $100,000 - $85,500 = $14,500
For June 30, Loss on purchase commitment = Signed value of inventory - Market value of inventory = $151,000 - $140,400 = $10,600
For Aug 30, Loss on purchase commitment = Market price of inventory at June 30 - Market value of inventory at August 30 = $140,400 - $120,500 = $19,900
