Purchase Commitments On November 17 of Year 1, the company entered into a commitment to purchase… 1 answer below »

Purchase Commitments

On November 17 of Year 1, the company entered into a commitment to purchase 100,000 ounces of gold on February 14 of Year 2 at a price of $313.50 per ounce. On December 31 of Year 1, the market price of gold is $270.60 per ounce. On February 14, the price of gold is $300.00 per ounce. Make the journal entries necessary to record (1) the November 17 purchase commitment, (2) any necessary adjustment at December 31, and (3) the actual purchase (for cash) on February 14. The company uses a perpetual inventory system.

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