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Compute how much is the loss on the purchase commitment

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Question 1: On January 1, 20x1, ABC signed a 3-year, non-cancellable purchase contract which allows ABC to purchase up to 12,000 units of Buko annually from XYZ at P15 per unit and guarantees a minimum purchase of 3,000 units. At year-end, it was found out that the goods are obsolete. ABC had 4,000 units of this inventory at December 31, 20x1, and believes these parts can be sold as scrap for P5 per unit. How much is the loss on the purchase commitment to be recognized on December 31, 20x1?

Option a. 70,000

Option b. 100,000

Option c. 60,000

Option d. 0

Reference no: EM132490948

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