Bonita Company signed a long-term noncancelable purchase commitment with a major

Question

Bonita Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2018 at a cost of $1,006,300. At December 31, 2018, the raw materials to be purchased have a market value of $955,300. Prepare any necessary December 31, 2018 entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31

Explanation / Answer

Date Account titles and explanation Debit Credit Dec.31 Unrealized Holding Loss—Income (Purchase Commitments) $51,000 Estimated Liability on Purchase Commitments($1,006,300 – $955,300) $51,000

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