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During the current fiscal year, Jeremiah Corp. signed a long-term noncancellable purchase commitment with its primary supplier. Jeremiah agreed to purchase $2.5 million of raw materials during the next fiscal year under this contract. At the end of the current fiscal year, the raw material to be purchased under this contract had a market value of $2.3 million. What is the journal entry at the end of the current fiscal year

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Answer:

Debit Unrealized Holding Gain or Loss$200,000

Crediit Estimated liability on Purchase Commitments $200,000

Explanation:

Preparation of the journal entry at the end of the current fiscal year

Based on the information given the journal entry at the end of the current fiscal year will be :

Debit Unrealized Holding Gain or Loss $200,000

Crediit Estimated liability on Purchase Commitments $200,000

($2.5 million-$2.3 million)

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