University:
Alabama State University
Course:
ACC101 | Accounting
Academic year:

2024
Views:

213

Pages:

3
Author:

Charlie M.

INVENTORY (Special Topics) PURCHASE COMMITMENT On March 15, 2025, the price of Product X increased significantly to Php 4,000. Is an obligation that is non-cancelable to buy product or goods in the future at a fixed price and fixed quantity. Php 4,000 Even if the price to be paid increased from Php 3,000 to Php 4,000, ABC Company will still pay the committed price of Php 3,000. MARCH 15, 2025 Php 3,000 OCTOBER 15, 2024 On October 15, 2024, to March 15, 2025, ABC Company made a purchase commitment to Beta Company to buy 1,000 Product X at Php 3,000 per product. There is No Journal Entry required at the date of purchase commitment, however, disclosure in the Financial Statement is required. DECEMBER 31, 2024 Php 2,400 If the Market Price increased after the year-end the gain on market recovery is limited to the loss recognized previously. On the other hand, if the Market price continued to decrease, then record another journal entry to recognize the Loss on Purchase Commitment. The decrease of price by Php 600 during the year-end is recorded as loss because had it been the entity purchased the products at year-end, the entity could have saved Php 600. INVENTORY ESTIMATION RETAIL INVENTORY METHOD GROSS PROFIT METHOD Gross Profit based on Sales Gross Profit based on Cost