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How much loss on purchase commitment did waldo recognize

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Question - In July 2020, Waldo & Sons signed a purchase commitment to purchase inventory for $250,000 on or before February 15, 2021. The company was concerned with rising prices due to COVID.

The contract was exercised by Waldo on February 1, 2021, and the inventory was purchased for the contract price.

On the purchase date of February 1, 2021, the market price of the inventory was $265,000. The market price of the inventory on December 31, 2020, was $230,000.

The company uses a perpetual inventory system and its fiscal year-end is December 31.

Required - How much loss on purchase commitment did Waldo & Sons recognize in 2020?

Reference no: EM133096322

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