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Bezzdna [24]
2 years ago
10

Paxton Co. signed contracts for the purchase of raw materials to be executed the following year at a firm price of $5 million. T

he market price of the materials dropped to $3 million on December 31. What amount should Paxton record as an estimated liability on purchase commitments as of December 31?
Business
1 answer:
arlik [135]2 years ago
6 0

Answer:

Accrued Loss on Purchase Commitments $2,000,000

Explanation:

December 31, (recognition of loss on purchase commitments)

  • Dr Loss on Purchase Commitments account 2,000,000
  • Cr Accrued Loss on Purchase Commitments account 2,000,000

Since the price of raw materials lowered by 2,000,000, the company lost money on its purchase commitments:

Purchase commitments loss = contracted price - market value = $5,000,000 - $3,000,000 = $2,000,000

The loss on purchase commitments is an expense, and accrued loss on purchase commitments is a liability.

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Option D

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<h3><u>Explanation:</u></h3>

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Mamont248 [21]

Answer: Relational

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2 years ago
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Answer:

D) prime rate plus 4 percent

Explanation:

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2 years ago
Why is it important for the ALSA management team to understand the importance of social media in their work?
Bad White [126]

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Explanation:

7 0
2 years ago
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Elena L [17]

Answer:

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