Question

Losses on purchase commitments are recorded at the end of the current year when:______.A. The purchase contract is irrevocable.B. The contractual cost of the inventory in an irrevocable purchase contract exceeds the current cost.C. The current cost of the inventory is less than the inventory cost in the purchase contract.D. The buyer purchased a quantity of inventory that was not sufficient to avoid a LIFO liquidation.

Answer 1

Losses on purchase commitments are recorded at the end of the current year when the contractual cost of the inventory in an irrevocable purchase contract exceeds the current cost.

Explanation:

In order to recognise a failure, both qualities are needed.

The organisation must fulfil a deal by charging more than current costs over a later period and is therefore at the end of this year in a losing situation.

In the financial statements of the preceding journal entry the purchasing obligation loss is recorded. The deduction is the deficit reported in the company's income statement in the time during which price declines happened.